Courtesy of Jeff Sommer, New York Times

THE economy may be lurching into another crisis, but you wouldn’t know it from the stock market, where an epic party is under way.

Yet this effervescence belies some ominous developments in politics and the economy. After the State of the Union address by President Obama on Tuesday — and the negative reaction to it among many Republicans in Congress — it seemed quite possible that $1.2 trillion in automatic government spending cuts might begin in just a few weeks, delivering yet another blow to an already lackluster economy. Most economists had expected minimal growth this year, even without a new shock from Washington — or from Europe or anywhere else.

These apparently conflicting pictures pose a quandary for market strategists. Which signals should an investor emphasize: the signs of disharmony in Washington and the negative indicators for the economy, or the upward trend of the stock market?

For Laszlo Birinyi, the veteran strategist and longtime market bull, the contest isn’t close. He says he starts by assuming that the market is smarter than any analyst. “We focus on the market itself, on what it is actually telling us,” he said.

In September 2009, when very few strategists were overtly bullish, Mr. Birinyi, president of Birinyi Associates, the stock market research firm in Westport, Conn., told me that we were in the early stages of a classic bull market. That analysis was prescient. The S.& P. 500 has returned more than 50 percent since then.

In a conversation last week, he said we were Continue reading →