…And We’re Back Over 1,400

The stock market looks set to rally today. On Friday, we gained back a little ground after our three-day sell-off. The good news today came from Germany where a report showed that business confidence is rising.

German business optimism has edged higher for a fifth consecutive month but failed to match the pace of improvement seen earlier this year, as the eurozone debt crisis continues to leave scars on Europe’s largest economy.

The Munich-based Ifo institute said its business sentiment indicator had risen from 109.7 in February to 109.8 this month – the highest since last July. But the latest increase was noticeably smaller than in previous months. “The German economy is losing some of its momentum,” said Hans-Werner Sinn, Ifo’s president.

March’s index rise was the result of German companies taking a more upbeat view on the outlook for the next six months. Their assessment of current business conditions was unchanged. Retailers’ optimism increased strongly, while the mood in manufacturing turned slightly more pessimistic.

Ben Bernanke spoke today on “recent developments in the labor market” and noted the puzzle that unemployment is declining despite fairly modest growth in the economy. Normally, such declines in unemployment need much stronger GDP growth. Bernanke gave some reasons why this is happening, but the key takeaway for investors is that the Fed seems to believe that short-term rates will stay near zero through at least 2014.

If you have time, I encourage you to read Bernanke’s speech. He’s very clear on what he means, and what Bernanke says is so contradictory to what we’re told he means. The Fed’s next meeting will be in late April.

Posted by on March 26th, 2012 at 9:34 am


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