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2. Housing is back. This is a new and powerful factor offsetting some of the growth-dampening effects of the sequester. New-home sales jumped 15.6% in January, the highest rate since the summer of 2008. The number of private residential projects launched was up a stunning 82% annualized in the fourth quarter of last year, which means this rebound has legs. All those houses being built and sold will fuel construction and manufacturing as consumers buy furniture and appliances to fill them. That's why stock prices of home-improvement companies like Lowe's and Home Depot are up. What's more, rising home prices boost growth. Research co-authored by housing guru Bob Shiller estimates that a $1 rise in housing wealth generates 10¢ in consumer spending, compared with a 2¢ consumption boost from an equivalent bump in equity wealth. If that's true, the $1 trillion rise in housing wealth last year boosted spending by $100 billion. Capital Economics predicts that further increases in equity and home prices will likely boost GDP by about 0.7% this year, which would be enough to offset the 0.5% hit from the sequester.
3. The fed is still throwing money around. Much of the record rise in stock prices is due to a government buying spree. For the past four years, the Fed has spent billions buying bonds and mortgage-backed securities, which helps lift stock prices by forcing investors to search for higher returns in the equity markets. Many smart investors have started to worry that the Fed's actions are creating a stock bubble and stoking longer-term inflation. For now, Fed Chairman Ben Bernanke believes the benefits outweigh the risks, and he has hinted that the Fed may keep the money spigots flowing into 2014. We can only hope that the déjà vu--as well as the reality of government dysfunction--will be over by then.