Main Street's Good News Is Wall Street's, Too

The news on growth isn't bad, and just because the Fed isn't cutting interest rates doesn't mean that stocks won't rise.

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I really hate the classic Main Street/Wall Street division. It ignores the investor class. About half of all Americans own stock, either directly by owning individual shares or indirectly through a mutual fund. So there's a lot of overlap there.

Still, plenty of analysts are acting as if the good news on the economy is somehow bad news for investors. The latest data on gross domestic product, jobs, and trade have caused many bearish economists—such as those at Goldman Sachs and Merrill Lynch—to toss in the towel. As if they had a choice.

The economy is clearly reaccelerating, and there's a really good chance that the second quarter—the one we are in now—will mark the economy's return to 3 percent-plus growth for the first time since the first quarter of 2006. "The latest data describe a vibrant rebound in growth in the current quarter," muses the econ team at JP Morgan, which boosted its forecast for 2Q GDP growth to 4 percent from 2.5 percent.

But now the worriers on Wall Street and in the media are fretting that good news on jobs and incomes means the Federal Reserve won't cut interest rates anytime soon—and that's a killer for stocks. Not necessarily so. MKM Partners economist Michael Darda points out that during the four instances when the Fed has been on pause for a year more during the past two decades—Bernanke & Co. last raised rates last summer—the stock market has gained an average of 26 percent.

So just because the Fed isn't cutting rates doesn't mean that portfolios won't rise, and it's been the triumvirate of stock wealth, jobs growth, and income gains that has kept the consumer spending and the economy rolling despite the recession in housing and autos.