stock trader at New York Stock ExchangeInvestors love to worry, and who could blame them these days? Intensified volatility continues to harass even some of the more astute market players. Investors are afflicted in these uncertain times with a common malady: Obsessive impatience. The question always boils down to what to do -- now. Good things must happen fast: global economic recovery, employment rebound and a soaring Dow.

"Too much is expected too soon in terms of the economy," notes George Brooks in his Brooksie's Daily Stock Market blog. Just 18 months ago, the economy and markets were on the brink of collapse. "A slow recovery is the most that could be expected," he argues. As for jobs, Brooks asks what CEO is going to hire even one person if he doesn't need any workers? Indeed, companies flush with hard cash continue to refuse to do any hiring. They prefer to stay liquid and continue posting high margins and huge profits. Self-preservation or sheer selfishness?

The view would look surprisingly brighter if investors would reset their focus. Instead of embracing what the voices of doom are proclaiming -- a double-dip recession and the demise of stocks -- check on how equity prices continue to edge higher in spite of all the seemingly bad news. Accentuate the pluses, such as the steadily rising, higher-than- expected corporate profits, without which a recovery can't materialize.

Two Sides of the Equation

Sure, the news last week was hardly comforting. July's unemployment is still unyielding at 9.5%, as corporate hiring remains anemic. The intractable high level of joblessness has been the bane of the market, with investors equating it with a blockage to any economic recovery. And some doomsayers insist that the housing slump is another albatross weighing down any chance of a turnaround.

Look at the other side of the equation, however. Despite the fearsome headlines, the Dow Jones industrial average last week advanced 1.8%, to 10,653.46, the Standard & Poor's 500-stock index also gained 1.8%, to 1,121.64, and the Nasdaq rose.1.5%, to 2,288.47. To put these numbers in perspective, note that in the past 12 months the Dow climbed 13.7%, the S&P 500 rose 11% and the Nasdaq composite gained 14.41%.

A big factor is the bright picture in Corporate America, believe it or not. Some 76% of companies that have reported second-quarter results so far showed positive earnings surprises, and 62% reported upside revenue surprises. Second-quarter profits reported by 413 companies so far advanced 28.8% year over year, and revenues rose 9.7%, better than the 8.8% that analysts expected, according to Yardeni Research. This marks the S&P's sixth straight quarter of positive earnings surprises following six negative quarters in a row through the fourth quarter of 2008, notes Yardeni.

Trading Volume Will Return

The continued upticks in the stock indexes were achieved despite what many observers described as a market where investors, particularly retail or individual investors, were "on strike," as reflected by the low daily trading volume. But the pivotal point is that the averages are up nonetheless.

Once investors get their bearings right, when the job numbers improve and housing sales and starts rise again, they'll rush for the buy button, and the volume that everybody is wishing for will come bouncing back. Individual investors are usually late for the party because they aren't equipped with the tools that the big guys -- primarily the institutional investors and high-tech, computer-driven traders -- employ.

So, is the market's trek to higher ground sustainable? Call it your usual summer rally, or the effect of the old Wall Street market dictum -- the market "climbs a wall of worry." Investors have lots of worries to surmount. But invariably, whenever market indexes appear to be plunging to their lowest depths (as they did during the financial crisis), intrepid investors come out and scoop up stocks. They are not just plain contrarians. They're the gutsy but disciplined long-term investors who look way beyond the negativity of the daily headlines.

"Intense Mood Swings"

Indeed, the market will continue to confound investors who tend to concentrate on those dreary headlines. "The stock market has been exhibiting bipolar symptoms in recent months with intense mood swings from mania to depression and back," observes Ed Yardeni, president and chief investment strategist of Yardeni Research. All the market's commotion has generated lots of swings between bullish and bearish emotions, "leaving most investors exhausted," he notes.

Unfortunately, investors as well as market analysts and the news media have been focusing on the week-to-week -- if not day-to-day -- economic reports and have yet to look further out. "If investors who have been buying, if modestly, are on the money, expect the next leg of the bull market that started in March 2009 to get under way," says George Brooks.

Nonetheless, headwinds will continue to challenge the stock market, and investors will need to stay focused on the important improvements in the economy, including a vigorous recovery of the once-moribund auto industry and the quick return to profitability of the once desperate-for-a-bailout banking industry. And even the housing sector is showing signs of an upturn, as seen in the stirrings of some housing leaders' share prices, which hit lows in July but are rise, such as Toll Brothers (TOL) and D.H. Horton (DHI).

Investors should take a stand at this point about acting on the developing improvement in various sectors of the economy and avoid being distracted by short-term problems that government policymakers are now addressing. To those still unconvinced, Warren Buffett himself has expressed optimism about the path of the economic recovery. So don't get so fixated on the headlines that you get stuck on the sidelines when the recovery regains its legs.

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Retool

We still have to wait 30 minutes to an hour to be seated at our favorite eatery. The Great Wal(of China)Mart's parking lot is still full. The movie theaters are still full when the featured movie is showing. There is still a line at the gas station, and the check-out line at the grocery stores. So, where is the problem in the economy? Where is the money to do these things coming from? Maybe we should just continue to do just as much as we can, work just as hard as we can(when and "if"we have work)no matter what the job is,and stop listening to the nay-sayers on tv,radio, and the newspapers!!!!!!

August 10 2010 at 9:19 AM Report abuse rate up rate down Reply
airamrka

THE REALLY GOOD NEWS? It keeps up like this and the public will flush the House and hopefully the Senate in November. This is one time I have to admit that perhaps the Republicans won't do a better job but it cannot be worse.

August 10 2010 at 9:02 AM Report abuse +3 rate up rate down Reply
garyrjas

Here is the problem. Everyone wants their benefits but no one wants to sacrifice. The rich only want tax cuts, the middle class wants tax cuts, and the low class pay not taxes. So everyone yells for cuts in government. But these little cuts mean nothing. If you want real cuts, support a means test for social security. Anyone making over $200,000 a year doesn't get it unless they loose their fortune. Make it a security blanket for the "just in case" scenario. Also, raise the ceiling to $200,000 for social security collections, and we will be in the black for 100 years. Next time we go to war, any war, but a 5% surcharge on all taxes. Nixon used to put surcharges on when we needed the money to finance the debt. Or, if you really want to cut the budget, get rid of social security and medicare altogether, and the budget will be balanced in a month. But no one wants to get rid of anything, and they want to cry about high taxes and a high deficit. Well, it doesn't work that way.

August 10 2010 at 8:01 AM Report abuse +2 rate up rate down Reply
2 replies to garyrjas's comment
tham1234

Well, there wouldnt be high deficits if everyone in Washington was business minded and knew how to run a company!! The answer is the average, very ignorant American must pay attention, and vote out anyone who supports deficit spending, and doesnt support a balanced budget. I would love if i had the luxury of running my business without worrying about revenue. I hope it isn't too late, people dont realize how much 13.4 trillion is....if you spent 1 million dollars a DAY, it would take over 38 THOUSSAND YEARS to spend 13.4 trillion!!

August 10 2010 at 8:14 AM Report abuse +1 rate up rate down Reply
Dog

Well said, except for ending social security and medicare out from under those who have been paying in for decades. I am very soon to be eligible for social security retirement benefits after contributing to the fund since 1963. I never earned enough to have any part of my income exempt from the tax; and being self employed the past 20 years, have had to pay a nearly double contribution to social security out of pocket. I've earned it, and I've planned my retirement on having it. The problem is, you can't eliminate the tax (and the benefit) for younger workers because we need their contributions to pay benefits NOW. Just tax all earned income without limit and we will be fine.

August 10 2010 at 8:21 AM Report abuse +3 rate up rate down Reply
garyrjas

Finally, someone writing something that is 100% accurate. A first for Finance Daily.

August 10 2010 at 7:55 AM Report abuse -1 rate up rate down Reply
vobox3343

I guess the voices of doom and gloom don't know who they are.

August 10 2010 at 7:48 AM Report abuse +1 rate up rate down Reply
Charles

This sounds more like one of Obama's "hope and change" illusions. The government is only making matters worse for business and job growth. All the increased taxes, regulation, give aways to union bosses for votes,health care changes cramed down our throats , etc, etc make sure that that businesses and jobs will not grow. Yes, the stock market has bounced back a little. However it remains about 30 % below past highs. Do you miss your freedom? Do you feel good that you have sold your children's future to pay for Obama's deficit? How do you feel about the Stimulus? Has it helped keep unemployment below 8% ?? Where is the truth?? Not in Congress and certainly not in the White House!!

August 10 2010 at 7:31 AM Report abuse +1 rate up rate down Reply
scottee

investors cannot invest as long as The Fed is printing and diluting our dollar and as long as The Fed is manipulating interest rates, stock prices and gold prices.

and a trillion dollar deficit is just wrong on all fronts! more spending and debt is not a solution to a spending and debt problem.

August 10 2010 at 7:30 AM Report abuse +1 rate up rate down Reply
Paul MacLeod

well there is some point here in this article .. I and most others just didn't get it.. corp profits .. don't equal increased employment.. and without knowing where or how these monster profits came from, well it's just a stupid argument..there is a lot to be said about expectations.. companies plan for the future by taking into account future expenses. budgeting, weighting sales vs expense .. it's called a balance sheet or a P&L statemnent.. one of the important items is taxes and another is benefits.. so add in the expected tax increases from the Obama bunch and then the unknowns and the costly knowns of the health care mess and now you have at least part of the answer why unemployment will remain stuck for the foreseeable future..it is what it is as they say.. it's mess and tax increases make it worse, added cost like this health bill makes it worse, and the unknowns stall recovery on the spot,, don't believe it .. you can watch it every day right now.. every single day.. that obama's bunch continue to move the country to the left will continue to stuff growth and you will be unemployed.. all you have to do is watch it happen now

August 10 2010 at 7:13 AM Report abuse -3 rate up rate down Reply
1 reply to Paul MacLeod's comment
ty

Too much cheap credit allowed Wall street to buy the entire economy. They crushed every bit of profits out of it they could. Now that it's broken, the government is bailing them out so they can maintain control of it. Kind of the opposite of what you'd do if you really wanted the economy to pick up and employment to recover.

August 10 2010 at 7:20 AM Report abuse -2 rate up rate down Reply
delawarejack

Goodness Gracious !! ....... Who the heck knew the Gene Marcial is actually related to Edward John Smith ??? ....... After reading this Marcial column, there can be absolutely no doubt that they are indeed related !!....... Who is Edward John Smith you may ask ??? ....... He was the Captain of another " Ship " that ran into trouble when they refused to acknowledge the truth as to their dire predicament ... until it was too late .... Our current " Ship " is our " Ship of State " ....... You may have heard the name of Smith's ship before ....... It was the Titanic .... And so it goes ....

August 10 2010 at 6:42 AM Report abuse +7 rate up rate down Reply
1 reply to delawarejack's comment
ty

Maybe that's intentional, was merely a conspiracy theory for years but the world bank is now talking about issuing currency for general trade rather than just the internal currency they've been doing for internal international settlements. Ready for one world currency to be followed by one world government?

August 10 2010 at 7:16 AM Report abuse +1 rate up rate down Reply
KKiegiel

Home sales have not bottomed out yet no matter what dumass analyst say on a daily basis. They may bottom out next year when we get more Adjustable rate mortgages adjusting/resetting and more homeowners unable to pay there mortgage. Now it's the commodities that are edging higher because producers are hedging there bets, so this may prevent us from deflation, but we the consumer will pay higher prices even though the manufacturer had no increase in cost. Manufacturers typically hedge for a year out, so this is good media to raise consumer prices.

August 09 2010 at 6:43 PM Report abuse +1 rate up rate down Reply
1 reply to KKiegiel's comment
ty

That will be years out, like 5-10. 5 years if they seriously pick up the pace of foreclosing, more likely 10 as they write off bad loans backed by "profits" handed to them by the Fed. Banks are loaned money at .25% and the lend it right back to the government at 1-3%. The only reason stocks are going up is a little of those profits get distributed around to insurance companies, hedge funds and smaller banks they do business with.

August 10 2010 at 6:57 AM Report abuse rate up rate down Reply