03/27/2009 05:12 am ET | Updated May 25, 2011

$3.9 Trillion Sitting on the Sidelines

Today's Wall Street Journal opened with the headlines, "Stocks Drop to 50% of Peak." The story goes on to point out that markets are back at levels not seen since 1997. The Dow Jones Industrial Average, constituting just thirty companies, did better than the Dow Jones Wilshire 5000 index which basically constitutes the entire market and fell by 53% showing just how broad-based this market sell-off has been. Today Ben S. Bernanke, the Federal Reserve chair, talked about 2010 as "a year of recovery" in his testimony before the Senate Banking Committee. The blogosphere was immediately filled with negative reviews, but the market rose dramatically. After weeks of relentless selling, the reassurance from our Fed chair that every possible action is being taken sent a sigh of relief through the markets.

While we know many difficult months lie ahead, there are bright spots to point to. Consider this; the International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index (sorry, that really is its name) increased 0.6% in the week ending February 21, 2009 from its level a week before, on a seasonally-adjusted, comparable store basis. It isn't helping company earnings, but it is an indication that the consumer spending levels are no longer in free-fall.

According to Vince Farrell, blogging at CNBC made an interesting point. In October 2008 (when the S&P 500 was at 840) 93% of stocks hit their 52-week low. On February 17, 2009 (when the S&P 500 was at 789) 8% of stocks hit their 52-week low. It seems hard to believe it, but 92% of companies' stock prices are not at their low point for the trailing year. So before letting the headlines set the tone, consider some of the underlying indicators.

MarketWatch commentator Irwin Kellner collected several indicators. I list my favorites:
• The Conference Board's index of leading economic indicators has risen for two months in a row.
• Producer prices have increased for two straight months.
• The measure of shipping key raw materials is called the Baltic Dry Index. It has doubled from recent lows.
• Existing-home sales rose in December and survey indicates will show rise in January.
• Retail sales were up .8% in January (he says 1%) and it was the first rise since June.

These are economic indicators that may encourage investing, and investors have money to spend. As of February 19, according to the Investment Company Institute, there was $3.9 TRILLION invested in money market mutual funds. The information on stock mutual funds is a bit staler, but the same industry source states that at year end there was $3.7 trillion in stock funds. Bond funds and hybrid funds (stock and bonds mixed) held $2.1 trillion. Should investors regain an interest in stocks, the stampede could be breath-taking.

Meanwhile we take time to look at the big picture. The Stimulus Bill will be meaningful. $400 billion is going into projects that directly create or protect jobs and personal income. The banking bailout is being slowly parsed out and will be a very different creature than it started out as. The government is aggressively buying mortgage securities; they are trying to establish a pricing comfort with these securities so that others will step in.

In the House a number of Representatives, including my own, Michael E. Capuano, have entered a bill demanding that the Securities Exchange Commission reinstate the uptick rule, something I have argued would slow speculators. While I am disappointed SEC chair Mary Schapiro hasn't moved ahead without Congressional action, I applaud the direction she has given demanding new vigilance in the enforcement unit.

Finally, in my opinion President Obama is playing the middle of the road role like a cello virtuoso. I was pleased to read that Matt Miller, writing on the Opinion page of today's Wall Street Journal, bemoans the blindness of the public to the trick he is perpetrating, tricking Republicans into thinking that center is left of where it belongs. It comforts me to reinforce my own belief that our President is a very careful and deliberate man. This letter will be in the mail before he gives his State of the Economy. I believe he will continue to be sobering and thus honest, but that he will provide some solace that we will steer through this storm -- and that the nation will approve.