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Historically and over the long term, interest rates, corporate earnings and major world events are the three major factors that drive the stock market up or down. Obviously, there are other factors that can impact the market. For now, interest rates are favorable, the economy is growing, and corporate earnings are on the increase. In addition, with the recent corporate goverance issues we could expect that the quality of the reported earnings should improve. Updated 2/1/04.

The Macro Economic Information
This information is used to monitor Stock Market Risk. This is based on the economic data. This data is suggesting that we are in a reasonable risk period to purchase common stocks. If this is true, then investments made during this window into investment quality companies, with growing earnings and lower P/E ratios, should give you a good chance of beating historical market returns over the long term. But, currently the market is over bought. Wait for better prices.

Another Critical Macro Issue is Interest Rates
They have formed a triple bottom. That is, longer term rates have been supported at the same lows for the third time since late 1998. Look at this chart on 30 Year Treasury Yield Index. This could suggest that interest rates will begin moving up and the bull market for Bonds may be near its end. Interest rates have been declining since 1982. Maybe the Macro Investment Cycle for successful Bond investing is near its end? If this is true, this will cause a change in money flow into other Macro Groups.

Concerning the War on Terrorism
For sure much of this emotional uncertainty is in the market already. But honestly, we have no way of forecasting the full impact of this or its related events. So for now...just like you...we will just have to wait and see the outcome. Gold prices sometimes are a measurement of investor uncertainty.

Emotional Factors to Monitor
1. We continue to be free from a major terrorism event.
2. Unemployment is decreasing from a high of 6.4% in mid 2003 toward 5.7% at years end. Consumer Confidence is increasing.

Factors to Build on the Current Economic Momentum
1. Crude Oil Prices drop towards $25.
2. Sustained GDP growth increases at >3% and earnings are increasing >10%.
3. FED switches bias, indicating they are considering a rate increase.