wealth effect

Major news stories ebb and flow, rising to the headlines and then slipping out of the spotlight. But even if they fade from attention, keep an eye on this handful of long-term issues, such as North Korea, which have the potential to disrupt the U.S. economy and global recovery.

Bernanke & Co. are increasingly aware of the big impact that rising "animal spirits" (in Keynes's words) can have on stocks and, in turn, the broader economy. Creating a self-fulfilling positive prophecy is the goal. Will it work?

Bernanke's zero-interest-rate policy is backfiring. Only the wealthy benefit from rising financial assets, as average Americans take on more debt and grow poorer. Worse, risky speculation is again being rewarded.

Officially underway since June 2009, the recovery has been tepid at best. The balance sheet of the average household is still straining under considerable debt, while incomes have barely risen, suggesting that the recovery has a shaky foundation.

The U.S. housing sector improved a bit more than expected in April, as home prices in 20 major cities rose 3.8% on a year-over-year basis, according to the S&P/Case-Shiller survey. But is rising housing demand real, or was it a temporary surge from the now-expired home buyer tax credit?

Retail sales rose in March for the fifth month in a row, sparking a surge of optimism that the recession is over. Personal consumption figures are rising modestly, and luxury goods are making a big comeback. Are we seeing a return of the "wealth effect"?