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"Consumer confidence in U.S. reaches highest level in more than four years," reads the headline today. But as this chart shows, confidence is still very low -- it's about as low as it was during the recessions of 1990-91 and 1980-82. But, of course, it's the change on the margin that is important, and that change is positive. Things are improving, even though the economy is still miserably weak.

Meanwhile, capital goods orders -- a proxy for business investment -- are down over 6% this year, although they have stabilized and even increased a bit in the past four months. This underscores the fact that the economy is weak, but it's not collapsing. A recession is not inevitable. Taken together, these charts also are consistent with the view that the strength in the equity market is not being driven by optimism, but rather by a gradual decline in pessimism.

Source: Confidence Is Up, But It's Still Very Low