Economy Slows, Stocks Surge: What Gives?

'Teflon investors' are relying on the good news
Posted Oct 6, 2007 6:54 PM CDT
Economy Slows, Stocks Surge: What Gives?
A pair of traders share a light moment as they work on the floor of the New York Stock Exchange, Thursday July 12, 2007. Stocks surged Thursday, pushing the Dow Jones industrials up 200 points into record territory as bright spots among retailers' generally sluggish June sales reports allowed investors...   (Associated Press)

Stocks are surging while classic indicators are signaling slump — so what gives? The answer, reports the Washington Post, lies in a bright jobs report and spiking Standard & Poor's 500-stock index. Backers are dissing the bad news as fast as they can finance, says the Post: "Call them the Teflon investors."
 

But analysts warn that risks remain: Europe's growth may slow, UK home prices are falling and a weak US dollar could add up to inflation. When adjustable rate mortgages reset, foreclosures could mean low spending and a bigger slump. "The dynamic of the market right now is, 'Yes, we acknowledge there are problems,'" says one expert. "But earnings growth can still be robust going into 2008." (More Wall Street stories.)

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