Positive indicators are in short supply, but there’s a good chance that more of these are coming, too. I would like to share some of the more optimistic signs and trends that we are seeing to offset a little of the negativity, just as people look for that first robin or tulip bud as proof that the gloom of winter will not last forever.

History shows that markets can turn abruptly and strengthen dramatically once a tipping point is reached. Investors have to be ready when that occurs. In our view, the risk of not being in the market now exceeds the magnitude of the risk of being in the market.

One macro factor to look at is sheer duration of the current recession. We’re up to 13 months now, which is well above the post-World War II average and within a few months of the 1973-75 and 1981-82 recessions that were the longest since the start of the Great Depression.

Just because every recession since the 1930s ended in 16 months or less doesn’t mean this one has to as well, but historical precedent plus the massive amount of government-minted stimulus equals reason for some optimism that we’re closer to the end of this slowdown than to the beginning.

As can be seen in the chart above, monetary policy actions are having a significant impact on money supply. The Federal Reserve began cutting interest rates in September 2007, and historically interest rate changes impact the economy with roughly a six- to 12-month lag. This increase in money supply is a very positive development for both the economy and market.

We have commented in recent weeks that credit markets are returning to at least some semblance of normalcy. This can be seen in corporate bonds, municipal bonds and repurchase markets in particular. The chart above is an excellent confirmation of this trend and combines numerous indicators into a single composite. The Citi Financial Conditions Index is a leading indicator and, after falling four standard deviations, is beginning a predictable mean reversion. This is an excellent early indicator on the economy and is now in an uptrend.

As the previous chart indicates an improvement in financial conditions, the chart below indicates China’s stimulus efforts are having an almost immediate impact as the country’s banks set a new record for new lending in December.

China retail sales rose 19 percent year-over-year in December, and on an inflation-adjusted basis, sales hit their highest levels in at least eight years. Thanks in part to robust lending, the Chinese economy is still growing at a high level, with fourth-quarter GDP rising 6.8 percent. Some forecasts call for that growth rate to accelerate later in 2009.