AUDIE CORNISH, host:

From NPR News, this is ALL THINGS CONSIDERED. Im Audie Cornish.

Investors actually have something to sing about as they ring in the New Year tonight. Stock prices are up in 2010. The Dow Industrial Average gained 11 percent this year and the S&P 500 gained 13 percent. Thats a broader measure of overall market performance. So after some rockier times, thats some good news for the economy. A sign of rebound in action.

But there are also those scarier signs; a weak job market and the European banking crisis just to name two.

NPR's Jim Zarroli reports.

JIM ZARROLI: Liz Ann Sonders has been looking on the bright side for a long time. Sonders is chief market strategist at Charles Schwab, and she's been seeing signs of a turnaround for a while.

Ms LIZ ANN SONDERS (Chief Investment Strategist, Charles Schwab): In the spring of '09, I felt very strongly that I had to apologize for optimism, because it was certainly not a very popular position to have.

ZARROLI: Even though the economy was flat on its back, Sonders was urging investors to stay the course. To make big money in the market, she said, you have to come in when most people are feeling scared - when no one can see the recovery coming.

This year Sonders has had her optimism tested again. For the first few months of the year, stocks did well. Then everything changed.

(Soundbite of a riot)

Unidentified Woman: Violence on the streets of Athens, as anger over harsh economic cutbacks boiled over. Three people died when protesters fire bombed a bank, a symbolic target in Greece's troubled times.

ZARROLI: Countries such as Greece, Ireland and Portugal which had borrowed heavily during the boom were having trouble paying their debts. A lot of big banks had lent money to these countries, and for a time it seemed like the second wave of the banking crisis that had brought down Lehman Brothers.

David Kelly is chief market strategist at J.P. Morgan Funds.

Mr. DAVID KELLY (Chief Market Strategist, J.P. Morgan Funds): The fear was that if one of these sovereign countries was to default, the banking system in Europe and the banking system around the world would take it on the chin again.

ZARROLI: On May 6th, in the middle of the crisis, came the flash crash, when the Dow fell more than 600 points in a few minutes. It was the kind of event that seared itself into the nervous systems of traders.

(Soundbite of a news clip)

Mr. BEN LICHTENSTEIN (Futures Trader): Here comes Morgan Stanley to sell. Morgan Stanley comes in to sell a 100...

ZARROLI: This recording of Chicago futures trader Ben Lichtenstein responding to the crash became a hit on YouTube.

Mr. LICHTENSTEIN: Guys, once it gets 75 - even offer. We are now, guys, 70 even offered. Sixty-nine trade.

ZARROLI: The flash crash would later be blamed on an unusual trade by a mutual fund company that set off a fierce round of computer-driven selling. The market rebounded as quickly as it fell.

And soon, David Kelly says, European governments organized a bailout that eased the banking crisis.

Mr. KELLY: I think that really reassured a lot of investors. And they've had doubts since then. But every time people have doubted what European governments were going to do, they've been very resolute in saying: We are going to make sure that nobody defaults here.

ZARROLI: In the months since then, there have been slow but steady signs that the economy is rebounding, though the job market is still weak.

The Federal Reserve embarked on a controversial program of quantitative easing, buying up government securities to stimulate the economy. All that seems to have persuaded investors that the rebound is for real. Stocks have been steadily rising.

But David Kelly says the wild swings of the past few years have left investors cautious.

Mr. KELLY: It's funny. A few years ago, everybody was asking me: What are the hot areas in markets? And now no one wants a hot area for fear they're going to eventually get burned.

ZARROLI: Among the stocks that are rising the fastest are technology and consumer companies. Liz Ann Sonders says she still believes investors are underestimating the strength of the recovery.

Ms. SONDERS: I don't have an expectation that we're going to have a boom in 2011. But I think we're going to be pleasantly surprised, relative to what are still fairly subdued expectations.

ZARROLI: So has it become a little easier to be an optimist?

Ms. SONDERS: I feel like I no longer have to apologize for...

(Soundbite of laughter)

Ms. SONDERS: ...for my optimism, and that has taken a while.

ZARROLI: Sonders says at some point investor sentiment will turn more positive. She says that may be the time when the financial markets are overheating again, and investors should think about pulling out.

Jim Zarroli, NPR News, New York.

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