...AND RICHER...:

Corporate profits, the basis for valuing stocks, have never been higher. U.S. businesses did a marvelous job of raising productivity and lowering costs during the recession, and firms are now highly competitive in global markets. Lower energy costs and a softer U.S. dollar add to their market strength. Companies are also flush with cash, and they have very low debt loads.

The Federal Reserve clearly wants higher stock prices to help lift the economy. The central bank has committed to buying trillions of dollars in U.S. Treasury bonds to push interest rates close to record lows. That makes it less attractive for households to put their savings into Treasuries or bank certificates of deposit. While stocks are riskier, they look enticing by comparison.

Stocks also look better because threats to the economic recovery have faded. Despite the banking crisis in Cyprus, the eurozone seems much less likely to crack up today than it did a year ago. The European Central Bank, the eurozone's version of the Federal Reserve, has signaled an unshakable commitment to preserving the currency union, taking a series of extraordinary measures that have lifted the markets' confidence.

America's fiscal problems also look much less daunting than they once did. Only a couple of years ago, lawmakers appeared ready to trigger a default on U.S. Treasury debt, and only a few months ago, Washington threatened to drive us over a fiscal cliff. But the politics have clearly changed, and neither party seems likely to threaten a government shutdown or a debt default. Even the rancorous debate over government spending cuts and tax increases should soon recede to the inside pages of the newspapers.

Investors can once again smile as they watch cable business shows and linger over their 401(k) statements. Even though house prices haven't recovered much, the net worth of American households is as high as it has ever been.

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