I've been quiet for a while, doing some thinking about where markets are heading. There are a couple of factors occupying my thoughts. First, US corporate profits are nearing record levels. Second, US unemployment does seem to be trending down. Third, US equity shares outstanding have shrunk in volume significantly due to buybacks. Fourth, interest rates will likely remain low for the foreseeable future. Fifth, there have been recent statements from the federal government that principal writedowns will occur on as many as 1 million mortgages. This would seem to be an ideal recipe for a massive market rally in the next year.
What stands in the way? Only that the US is debt-ridden, has fixed very few or none of the problems with its financial system, and due to a dearth of marketable skills may have difficulty re-employing people in jobs that pay meaningful wages. And Europe may still collapse.
Only the last problem worries me in the near term. The other problems may ultimately spell disaster but will not be meaningful in the short term. I don't think Europe will be allowed to collapse, however. So this analysis argues in favor of a market rally this year.