Stock market outlook is improving

It looks like the outcome of the bank stress tests isn't damaging the market, and while there continues to be an ongoing debate regarding whether banks should have been bailed out in the first place, it's clear that the Obama administration will not allow large banks to fail. That places a floor under the financial sector in the stock market, and allows investors to gather confidence about the overall economy.

You'll see a lot of articles and hear a lot of pundits say "we're not out of the woods yet". And that's true in terms of unemployment, bankruptcies, and commercial investment. But these indicators usually are at their worst after the bottom is reached in the stock market. And the stock market low we reached in early March really does look like the bottom now. Two months ago, the market wasn't sure how bad the economy was going to get. Now there are some positive indicators, such as rising consumer confidence and a stabilization of the service sector, that suggest we're "getting off the steep part of the roller coaster".

And although few people are anticipating a robust recovery, the market is breathing a sigh of relief that we're not continuing to fall into the abyss. And that's good enough for me to recommmend increasing your allocation in the stock market back to higher levels commensurate with your risk tolerance and your time horizon.