The market hiccup yesterday was widely attributed to Europe, which raises the question—what’s happening in Europe? I haven’t written about Europe for a couple of months. The last time, just after Thanksgiving, I noted that the situation was normalizing but we could certainly expect storms ahead. Two months later, the storm warnings are starting to sound.

Economic improvement has continued since then, with a start at recovery in the northern tier of the European Union. The southern tier, however, has continued to weaken—not so much economically as politically. Greece, for a change, isn’t the driving factor this time. Instead, two of the largest countries in the EU, Spain and Italy, are now showing cracks.

I have spent some time looking at the fourth-quarter GDP report over the past couple days, but it occurred to me that it might be helpful to step back and take a look at exactly what GDP is, what it is composed of, how growth happens, and what it means. This is essential to understanding any analysis of what happened in the fourth quarter.

I am actually not going to spend a lot of time talking about the numbers today, as I have made most of my points multiple times. I am also on my way back from the West Coast and am writing this in Sky Harbor airport, which will constrain my time.

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.