The stock market started out the second quarter  with most major stock market indexes rising significantly off their lows set in mid March.

Investors were emboldened by the military success in Iraq that the U.S. forces continued to achieve during April.

With every battle and victory the stock market continued its upward ascent as investors theorized that it was the uncertainty about the upcoming war in Iraq that had been holding the U.S. economy hostage for the past few months. 

Furthermore, investors prognosticated that when the War in Iraq was over that the anemic U.S. economy would be resurrected and  as such, corporate profits would again be growing at a robust pace.

This in turn would raise the prices of many stocks and reward all these astute investors with windfall profits.

Stock market investors chose

to ignore the pervasive over- capacity and lack of pricing power in many industries,  the deteriorating labor market, the impact of the terrorist threats worldwide, and the record number of personal bankruptcies in the first quarter of 2003.

Ironically, even though the global economies were actually more anemic than the U.S. economy, many European stock market bourses actually rallied more aggressively throughout April. Investors cast caution to the wind and jumped on the European stock market bandwagon with a frenzy.

Risk was not the focus of these investors even as suicide bombings throughout the world continued to escalate throughout April.

The bull market for bonds continued throughout the second quarter of 2003. The biggest winner for the bond market in the second quarter was the corporate bond market, with the

high yield (junk bond market) performing the best.

Bond market investors  ignored the weakened balance sheets and the enormous debt loads that many public corporations were straddled with from the go-go 90s.

This optimism by bond investors for corporate bonds in the second quarter was a 180 degree turn-around from the last two years when bond investors shunned all but the highest credit quality bonds, punishing indiscriminately all issues in the high yield  bond market.

In reality however, the only positive for many cash strapped public corporations over the past three months is that they are now getting ready access to cash to stay alive in the near future.   

The jury is still out as to whether
the recent confidence of bond market   investors  lending   their