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Investing Specialists

Forget Fed Tapering--It's All About the Economy

Positive economic news--including Friday’s job report--finally overcame fears about Fed stimulus cutbacks.

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It took five days, but the market finally realized good economic news for what it really was: a positive for the stock market. The onslaught of positive economic news the last couple of weeks has been relentless, and finally pushed the bears back into the corner. Even fears of an earlier Federal Reserve reduction in bond purchases couldn't stop the bulls on Friday, when a positive jobs report pushed them to victory. The bears were winning for the first four days, but the bulls made up the entire set of daily losses this week in one day--Friday. The S&P 500 closed almost unchanged from last Friday, after declining 1.2% during the first four days of the week.

My reports since April have been relatively cautious, by my standards, as consumer spending failed to show much of an improvement, and income growth was mediocre. Mind you, I never varied from my 2.0%-2.5% GDP growth forecast for 2013, but my bias was nevertheless to the downside. I just didn't seem to see a boom or rapid acceleration. Some of the economic numbers this summer gave even me a good scare.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.