Far be it for me to be labeled a Pollyanna. That term applies to those who have such a positive view of life that they have lost their grip on reality.
However, in the face of dire news coming out of the woodwork, the facts support the prospects of a reasonably improved second half of the year -- with further gains into early next year.
This year so far has been very positive in spite of advisers and analysts who have been saying repeatedly that we were in a bear market and heading for a recession. The Dow is up 5.4 percent, the S&P 500 is up 8.3 percent and the Nasdaq is up 12.7 percent. To the Dow and the S&P 500, we can add another half year's worth of dividends -- about 1 percent.
As if market gains haven't been enough, we have also had a rise in new home sales, which bodes well for unemployment. Construction across the country dwarfs any other single industry, except government employment, so when construction starts to turn around, it means that there is a light at the end of the tunnel. Unfortunately, the layoff of government employees is offsetting the gains in the private sector, so unemployment figures aren't yet changing to any great extent.
Smart investors have conditioned themselves to tune out the noise of TV financial shows and other news sources trying to create a level of hysteria that provides entertainment. Successful investing is simple and boring. It just takes patience, low fees and diversification. Financial news would cease to exist if that's all they had to talk or write about.
While companies generally have been slow to hire, this condition has contributed to their increased productivity and record profits. Meanwhile, the unemployment rate is only about 5 percent for people with college degrees who are more than five years beyond graduation. That percentage is considered to be full employment, so at least one subset of our population has escaped the unemployment line.
According to a money manager who has been right in years past, we should have had spiking interest rates and inflation by now. Bill Gross, who runs PIMCO's bond trading organization, comes to mind as probably the most famous clairvoyant who has guessed wrong (so far) on his expectation of sharply rising interest rates.
Instead, the government sold two-year Treasury bills last week that paid 0.3 percent per year. If you held it for the two years, you would earn slightly more than one-half percent. With inflation at 2 percent, you're going backward.
There is one dark spot. The Trend Research Institute has a report saying the economy could begin to soften 11 months from now. That's good to know. Midway through 2013 we could see portions of the economy sag, and the gross domestic product could actually fall sometime in 2014. After that brief interlude, the economy will be poised for a five-year boom ending around 2020.
So, there's a heads up. Overall, though, the economy and the stock market continue to look positive for the immediate future. The only alternative would be a guaranteed investment earning less than nothing.
If you're still worried about the future, hedge your bet with a balance of bonds and stocks, but don't be obsessed with a desire to second-guess the future. A better use of time would be to refinance your house if you haven't done so within just the past six months. We may never see rates this low again in our lifetime.
Call me a Pollyanna if you don't agree, but low interest rates are the mother's milk of rising stock prices, and today's rock bottom borrowing costs create an open field for good economic things to happen.
Steve Butler is CEO of Pension Dynamics. Contact him at email@example.com or 925-956-0505, ext. 228.