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Time to hit reset button on stocks

February 27, 2014: 1:30 PM ET
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Stocks are flat this year. Let's pretend the first two months of 2014 didn't happen and start over.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

The first two months of the year are just about over. And unless you're obsessed with the daily market gyrations, it would seem like not much has changed on Wall Street in 2014.

Stocks are pretty much trading right where we ended last year. The S&P 500 is up about 0.1% so far this year.

But the story is a bit more complicated than that. If the market were a baseball game (spring training has begun!) the Bulls and Bears would be tied after one inning.

And what an eventful inning it has been! (Please forgive me for my tortured baseball analogy. If half-innings are equivalent to months then a full year has only six innings.)

Related: Quit overreacting about emerging market turmoil

In case you haven't been paying attention, the Bears came out swinging for the fences in January. They roughed up the Bulls pretty good with concerns about the three big Es: emerging markets, earnings and the economy. This is how the S&P 500 looked after just one month.

But the Bulls put their rally caps on in February. The market has roared back to life this month thanks to hopes that new Federal Reserve Chair Janet Yellen will manage the central bank's unwinding of stimulus -- the once dreaded tapering -- successfully.

Related: Market needs a correction. But this isn't 1929!

Some better earnings reports have also helped. And there  have been fewer global worries ... Ukraine notwithstanding.

Finally, there's a growing consensus that the poor job market numbers for January and February might be weather-related anomalies. That may turn out to be a faulty assumption. But here's how the S&P 500 has done in February.

Now what? Or to quote The Alan Parsons Project, where do we go from here?

(Confession. I was a band geek in college. For some bizarre reason, "Games People Play" was part of our repertoire. Don't know why. I was an undergrad in the early '90s. You'd think some of that then newfangled grunge would have rallied the football and basketball fans more than a cheesy prog rock song from 1980.)

That's why we have to hit the reset button. Pretend the first two months didn't exist. It was all a dream. Like that season on "Dallas" (the original one) when Bobby Ewing died.

It's time to focus on all the data that will be coming out over the next few weeks and months.

I don't know what's going to happen next. And nobody does. Any expert that claims to know with absolute certainty if the markets will continue to climb or not can't be trusted. Seriously.

Consider that just a month ago, investors were literally freaking out. The CNNMoney Fear & Greed Index, which measures seven indicators of market sentiment, was flashing signs of Fear. Now? It's back in Greed territory.

Related: She's back! Yellen talks about the economy in front of Senate

But here's what I do know. The big wild card is going to be the economy. Were the weak job numbers of December and January really just due to snow? It's impossible to answer that right now.

And unfortunately, we may not have much more clarity next week when the government releases the payroll figures and unemployment rate for February. The weather was pretty lousy (unless you're a polar bear) for most of the country in February. The job numbers could be clunky as a result.

However, once we get a clearer picture of the labor market's health -- or lack thereof -- that will help determine many other things that investors need to know to help them figure out what stocks are going to do next.

Related: Job growth is weak ... but is just due to the weather?

If the jobs numbers continue to slide, the Fed may have to reconsider its tapering plans. That might be viewed as a short-term positive. But make no mistake. It's a long-term negative.

Anything that hints of an economic slump ... or worse, another recession ... is bad news. That could kill off the housing recovery. It could hurt consumer spending. And it could lead to weak corporate earnings.

That last bit is what Wall Street cares about most ... even though most average Americans obviously are more worried about their jobs and home values than protecting profit margins. As well they should.

Related: Good news and bad news about corporate sales

So we need to hope that the job market weakness of the past few months is in fact a fluke. If that's the case, the Fed can stick to its plan of slowly weaning the baby that is the market off of the teat that is quantitative easing.

Yes, interest rates will likely rise further than they have already as a result. But they probably will do so gradually. And traders will learn to live with that.

It may be overly simplistic but a healthier economy should lead to continued gains in stocks. Just don't expect another 30% increase like we had for the S&P 500 last year.

So let me amend what I said earlier. I do think I can safely make one prediction about the market. It will continue to be volatile. The Bulls and Bears still have a lot of turns at bat before this year is over.

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Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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