I wrote yesterday that “bad is good,” in that the poor results for fourth-quarter GDP actually concealed quite a bit of underlying good news. I still feel that way, but after taking a closer look at the numbers, I think it’s worth considering what the report means for the economy in the next couple of years.

There are two major things going on here: the recovery of the real economy, and the slow removal of federal fiscal and monetary stimulus.

So, gross domestic product—that is, the U.S. economy—declined a bit (by 0.1 percent, to be exact) for the fourth quarter of last year. Is this it? Is a recession starting? What about all the good news I’ve been discussing? Aaaaaaaaaaaah!!!

Okay, I feel better now. In fact, while no one wants to see a decline in GDP, if we have to have one, this is exactly how we want it to happen.

The S&P 500 Index recently closed above 1,500 and is making a bid to go up from there. Fund flows are starting to move away from bonds and back toward equities—for the past month, anyway. There is speculation that the “Great Rotation” away from bonds and back to equities is underway. Is it so? And if it is, what will that mean?

Quite possibly it is true, and if so it could mean a lot. Sentiment seems to have shifted substantially with respect to the stock market, with investor surveys at historically very high levels. When narratives shift, the effects can be big and lasting. But sentiment can only go so far, and so it pays to look at the underlying fundamentals as well.

Last week, I discussed three books that offer a good basic overview of how to invest in stocks. The next step—and, in many ways, a more difficult one—is to figure out how to apply the conclusions you’ve drawn. How can you identify the stocks that meet your criteria?

There are several services that rate stocks. Value Line is one of the oldest and apparently has a great track record. Its rating system is fairly simple, and its data sheets present a lot of information very effectively. Many other screening systems rest on a Value Line base, selecting their stocks from among those that VL ranks highest for timeliness or other factors. Another significant advantage: The weekly hard-copy version of Value Line is available in many libraries for free, which is how I used to use it. It’s definitely worth a look.

I mentioned the other day that the narrative in our country has changed and that the focus now is on what is going right. The news today supports this notion yet again. New unemployment claims came in at a five-year low, and housing continues to strengthen.

With the economy recovering, the market doing well, and the politicians seemingly getting down to the business of actually negotiating rather than yelling at one another, people are feeling more cheerful, especially about the stock market. Investor surveys are at very high levels for confidence, volatility is at historically low levels, and U.S. markets are closing in on all-time highs. What’s not to like?

Actually, there are a lot of reasons to be concerned—which I have written about in the past and will do so in the future—including the fact that high levels of bullishness are themselves contrary indicators. Today, however, is about how to invest in individual stocks, rather than about the market as a whole, and here there are encouraging signs.

When I saw the above headline in today’s New York Times (page A3), I have to admit I was taken aback. All of the discussions I have heard about nuclear war recently have been metaphorical, typically centering on how Congress is dealing with something. This one isn’t. Reading the article is scarily reminiscent of civil defense drills that I am just old enough to remember—when we stood in the central hallway of the school, facing the wall with our hands over our heads.

I couldn’t have asked for a better reminder that even as economic risks recede—and they are receding—there are a number of geopolitical risks that will come back to fill that worry-space. The relationship between India and Pakistan is certainly one risk; another is Japan and China, where, as of yesterday, both countries were sending fighter jets to the disputed Senkaku/Daioyu islands.

I hope everyone enjoyed the long weekend as much as I did. My son, Jackson, and I built a small working wooden catapult and a fire-dog house using his cardboard blocks. And he went skating and to a SteveSongs concert with his mom.

A popular talking point these days is that the deficit over the past several years has been the worst since World War II. That’s absolutely true, as you can see from the chart below, but the statement misses a key point.