Volatile stocksInvestors scrambled for cover in the stock market last week. And understandably so.

The Fed said the road to economic recovery remained unusually uncertain, a sentiment that was quickly echoed by tech giant Cisco (CSCO). Some investors were especially attentive to Cisco CEO John Chamber's comments given his track record of being ahead of the curve.

But plenty of good news may be getting overlooked in a market gripped by one form anxiety after another. That pervasive fear has investors crowding into safe holdings like government bonds despite rock-bottom yields. It could also create a good window to get into what is increasingly looking like a cheap stock market.

Fears about a vicious bout of deflation in the U.S. have been rampant, for example. And yet consumer prices actually rose 1.2% in July at an annual rate, meaning that deflation remains more prophecy than reality (the deflationists will quickly point out, though, that minus gasoline and food, consumer prices rose a scant 0.1% in the month).

Germany Leads a Eurozone Rebound

Deflation worries replaced fears earlier in the year that eurozone was on the verge of an implosion. But quite the opposite has happened. Last week, the juggernaut German economy clocked in at a growth rate that would be annualized to higher than 9%. The strongest expansion since German reunification is lifting overall eurozone growth to a healthy 1% per quarter, the fastest rate in four years.

Now rising spreads on Irish sovereign debt compared to Germany are causing some skittishness. But investors should keep the situation in perspective. Indeed, more opportunities could be created if fears are blown out of proportion as they were with Greece a few months back.

The GDP of Ireland is merely $267 billion. At its current rate of growth, the nearly $4 trillion Germany economy adds on more than Ireland's GDP every year.

The Big Worries: China and the U.S.


Other major economies in the region are demonstrating a sharp resiliency too. The U.K. reported the strongest job growth in 21 years last week. The hiring follows a surprisingly sharp expansion in GDP.

A stronger rebound than almost anyone had expected is materializing across the Atlantic. And bears are now pointing to a slowing in what were recently seen as pockets of strength -- the Chinese and U.S. economies -- as reasons to take cover.

But much of the hyperventilating that Chinese policy moves to cool the real estate market would spiral into a broader collapse has proved unfounded. Indeed, Chinese policymakers have demonstrated an admirable ability to moderate the pace of their economy -- and that should be soothing to investors.

Of course, big problems do remain in the U.S. And signs of a slowdown amid stubbornly high unemployment soars are causing major skittishness. But investors badly burned by the financial crisis two years ago now seem to expect only the worst and pile into safe assets as a result. The turnaround in Europe, though, shows many of the fears may be overblown.

And that could lead to a rally for stocks if nerves eventually do calm.

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Jim Blackburn

You dumb cluck, stocks are up nearly 70% off the 2009 lows. Time to ring the register and sell to chumps like you.

August 17 2010 at 8:45 AM Report abuse -1 rate up rate down Reply
Davie2743

Any investor who has not created a solid position in the stock markets by now will be sorry within the next few years. Stock P/E ratios are at bargain levels, bank interest is non existent, and although the economy will sputter along for awhile this cannot last forever. To be a successful investor you must take a chance and make a bet on the future. Any investor who did this since the 1960s has made a bundle.

August 17 2010 at 8:21 AM Report abuse rate up rate down Reply
darlingtonnative

If I had any money to invest I'd wait until stocks crash one more time before they shoot to the moon as the FED prints money with abandon.

August 17 2010 at 7:59 AM Report abuse rate up rate down Reply
youall315

Trust me.........the stock market is NOT cheap.....but it will be soon. Have you heard that DEFLATION is on the horizon?

August 17 2010 at 7:31 AM Report abuse rate up rate down Reply
jsbseven

the road to recover is get the bums out of washington and the white house while we still have an america

August 17 2010 at 7:06 AM Report abuse +1 rate up rate down Reply
lgoodwin42979

I've never invested in the stock market - Http://www.stockmarketinfoguide.info - but I'm ready to try.

August 17 2010 at 6:18 AM Report abuse +1 rate up rate down Reply
ldrleslie

Germany is proving that reducing government spending is the solution to reviving the economy. The United States is trying to spend it's way to economic prosperity. The exact opposite. Our government(Democrats)can not lose their appetite for spending and will eventually drive us to bankruptcy.

August 16 2010 at 12:23 PM Report abuse +6 rate up rate down Reply
jonbonanno

Um, no, try again.

August 16 2010 at 8:42 AM Report abuse +2 rate up rate down Reply