Could The Market Surge?

I am unable to find it, but several weeks ago I posted my thoughts on the economy this year, from an investor's point of view. Regular readers know I am an incurable optimist. No matter how bad the economic news, I remain bullish on the American economy.

In that post I can't find, I opined that most likely the economy in 2014 would just meander along, not making much movement, but the general trend would be "up" as measured/tracked by the stock market. I said that in "my reality arena" I did not expect a sudden surge or a sudden turnaround.

However, in "my crazy arena" I said there are tea leaves that suggest the economy could jump significantly, taking everyone by surprise.

In the reality arena, the numbers do not look good: the real unemployment numbers, the housing numbers, the debt, the deficit.

But in the crazy arena, there are some interesting things to note. Last quarter's GDP was reported as 0.1 and on revision may come in below zero, a contraction in the economy for 1Q14. But now we are hearing that the GDP for the current quarter, 2Q14 GDP, could approach 4%.

This is what I'm talking about, from MarketWatch:

The U.S. economy has warmed up after a frigid first quarter and there’s no reason to expect it to cool off again anytime soon.

A cluster of economic reports this week, spearheaded by sales at retail stores, are expected to show a faster pace of growth in April and May. And all trends point to the nation’s gross domestic product climbing to a 3%-plus annual clip in the second quarter after hardly any growth in the first three months of the year.

Yet none of these reports, however rosy, will offer much clue on whether the economy will stay on a hotstreak after the second quarter ends.

At the same source, I ran across this headline story at MarketWatch:

Hang on, say some strategists. Rather than a wholesale rout, they expect the retreat in growth stocks to only cap the advance in the mega-cap benchmarks.

“It certainly will be a drag,” said Paul Nolte, portfolio manager at Kingsview Asset Management. “The S&P 500 won’t go significantly higher but you’ll see significant dramatic sideways action.”

Plus, record cash on corporate books may see its way to increased mergers and acquisition activity and investment — and that may replace growth as the next catalyst.

“The next step to that is merger activity,” Nolte said. “ It’s a way to grow business and earnings, where one plus one is greater than two.”

Again, in the reality arena, "the S&P won't go significantly higher," but in the crazy arena, once some big-name M&A stories are told, it's very possible the market could surge. I honestly don't think that will happen, but I won't be surprised if this turns out to be a very, very interesting (and rewarding) year for investors.

While searching for that earlier post, I was reminded of all the energy companies that have increased their dividends this year or have announced that they will be increasing their dividends -- another reason that keeps me so optimistic. Companies don't increase their dividends if they think they are going to have to manage some difficult economic news.

As far as I can tell, all the bad news has been announced and baked into the numbers going forward, most importantly: ObamaCare, the deficit, and the debt.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.