NEW YORK (Real Money) -- Here we go again with the markets headed down and the accompanying dire forecasts for the amorphous "economy" and the equally opaque "stock market." I think you have to look at some of the signs within the stock market to measure how much of this is fear and how much is actuality.
For example, we know the utilities and the real estate investment trusts have been rallying like mad this month. Last week the utes stalled out. But the real estate investment trusts kept running. I believe that you simply can't have the kind of run we are having in the REITs if this country is about to fall off a cliff. The move is too pronounced, particularly among the apartment-complex and office-building REITs, which have the lowest yields. This group, unlike the utilities, has a true commerce component to it, and that component is saying there is growth both to rents and to nonresidential construction -- huge parts of the economy.
You aren't going to have a severe crash in the market while so many stocks are giving you a 3% or better dividend yield in many different industries. Those stocks would only sell off if U.S. Treasury interest rates went higher -- and if rates went higher, the portion of the stock market that is most tenuous, the banks, would put in a rally. As it is right now, the banks are the market's chief cause for concern because rates are low. Let's be clear: If rates go higher now -- something that's a possibility, given all of the strong loan data we are getting -- it would be better for the stock market than if 10-year rates remain on a collision course with 2%.