Could a good economy be bad for stocks? Yes, and no...

Is a good economy bad for stocks? Yes, and no...

When is it yes? When the money's on the Fed---and when "the money" is short-term money. A good economy means less accommodation from the Fed, therefore, traders who've bought thinking others are buying because the Fed is printing uh, typing, will back out of the market on data (a pick up in economic activity) that would inspire the Fed to back off.

When is it no? When it's clear that the economy has broken free of whatever's been shackling it and the short-termers have had their reaction (think last year's selling on taper-talk). A growing economy means growing business and growing earnings. And growing earnings---at a pace that exceeds priced-in expectations---means higher stock prices. It also means, however, higher interest rates. Which will, I suspect---aside from the usual politics---pose the biggest challenge for the market in 2014. If, however, the 2014 stock market is not tested by higher interest rates, it means that the economy hasn't yet broken out of the muck, which means, alas, another year of traders trading taper-talk and you and me assessing guessing what the longer-term ramifications of rampant money creation will be.

It's going to be another interesting year for sure...