Confusion and economic cross-currents are normal at this point in the business cycle. What we're seeing now is the regular churning that occurs as the economy completes a slowdown and struggles to get back on a growth track. For investors, the key is to isolate the trends that really matter. The most important one is that the economy as a whole is still growing. That's basically good news for corporate profits.
Companies can maintain earnings during a brief growth recession by cutting costs.
And a modest rise in unemployment is also positive for corporate America, because it makes jobs easier to fill, and restrains labor costs. An uptick in unemployment is also likely to encourage the Federal Reserve to cut interest rates. The majority of Fedwatchers expect chairman Alan Greenspan to reduce rates at least a quarter percentage point at the next Fed meeting on May 15. As I've said before, I think that the big money over the next five years will be made on the largest tech stocks. No one is going to stop buying toothpaste or detergent because of a mild economic slowdown.