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A tale of two economies

David Brancaccio Feb 16, 2012

Today’s teachable moment: stock prices tend to go up when the economy seems more secure. Claims for U.S. jobless benefits unexpectedly fell to a four-year low last week. Experts see that pointing to slightly better times in America.

Stephen Wood, the chief market strategist at Russell Investment Group, says on days when investors can really assess the fundamentals of companies and the economy, they see an encouraging picture. And, it’s now a case of two economies — Europe and the U.S.

The European Central Bank’s decision to step in and keep banks afloat has given politicians time to lay out longer term solutions, says Wood. European leaders are taking “a crisis situation and upgrading to a chronic situation.” And when it’s chronic, as opposed to crisis, investors can at least manage around it much better.

On this side of the Atlantic, Wood says the economy is “improving and measurably” though he admits it’s at a tortiose’s pace. Unemployment has been slowly falling, housing seems to be finding its footing and corporate profits are at record highs. According to Wood, while happy days for market watchers may still be off in the distance, there are glimpses of a stronger U.S. economy that shouldn’t be ignored.

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