Who has it right, stock traders or bondholders? Doesn't, ultimately, matter...

The market got the year off with a decline that, depending on the index, was close to the depth of the single notable sell-off of last year. Notice I use the terms "decline" and "sell-off"---at merely 5-7%, the downdrafts of last year and this never reached correction, let alone bear market, territory. Now, if either or both of those moves made you nervous, you need to rethink how you think about the market. I assure you, last year---in terms of volatility (lack thereof)---bore no resemblance to market reality.

If many economists, including those at the Fed, have it right, 2014 will be the year the economy finally reaches escape (from quantitative easing [QE]) velocity. Problem is, not only has the economy not thus far found its wings, it has in fact waned (in terms of the rate of growth). But of course all flights are cancelled amid a polar vortex.

So then, the stock market---having almost recouped January's recoil---is telling us that when the weather warms up, so will the economy. Makes sense to me. However, as I've been complaining lately, the bond market ain't buying it. Bond yields have been flat to lower, while the S&P 500 is a digit or two from its all time high. The question of the day, therefore, is what's up with the bond market? Why, while the stock market is clearly discounting an accelerating economy, the bond market clearly isn't?

Well, it could be simply that stock and bond investors are at odds with one another. Or it could be that the stock market is not discounting a robust 2014 economy after all. Meaning, we could be back to bad-news-is-good-news---back to a market where traders focus on the Fed and the stimulative (for, they think, the stock market) effects of QE. Maybe if economic growth tapers, the Fed will taper the QE taper. I.e., maybe the Fed will continue pumping billions into nowhere (well, onto bank excess reserve accounts held at the Fed earning .25%). Which would, alas, likely inspire speculators to further distort the markets for, say, bonds of all stripes, emerging market currencies, gold, or who knows what.

Or maybe the U.S. bond market is receiving inflows from investors exiting currently risky currencies---they call it a flight to quality---which would put downward pressure on interest rates. If that's the case, the present high demand for bonds may not be all about fear over a slowing economy.

Honestly, my best guess is my first guess: That stock traders get that the Fed has overstayed its welcome and that they believe the economy will deliver as the year unfolds. And that bond investors remain recovery-skeptics---they're going to have to see it to believe it (or, as I pondered the other day, perhaps the bond market has yet to sober up).

Thank goodness you're neither a confident stock trader nor a nervous bondholder. You're a long-term investor who understands that all things are cyclical, that no one can consistently time the ups and downs, that a diversified portfolio is essential to investment success (and personal sanity), and who looks to enjoy---for years and years to come---the goods and services provided by the global companies whose stocks occupy that all-important long-term, growth-oriented, portion of your portfolio...