Risk On - 01/03/12

  • The four conditions for a sharp upward turn in equity prices are moving into place

Here I go, here I go, here I go again (again?)
Girls, what's my weakness? (men!)
OK then, chillin', chillin', mindin' my business (word)
Yo, Salt, I looked around, and I couldn't believe this
I swear, I stared, my niece my witness....
So what you wanna do?
What you wanna do?
Mmm, I wanna shoop

Shoop shoop ba-doop
Shoop ba-doop
Shoop ba-doop ba-doop ba-doop
Shoop shoop ba-doop
Shoop ba-doop
Shoop ba-doop ba-doop ba-doop.

-- Salt-N-Pepa, "Shoop"

It doesn't get any better than the close of Dec. 30, 2011, with my surprise S&P 500 year-end close precisely on target (to the S&P point!).

But the market's challenges don't stop because of a flip in the calendar year.

"Well let me bring you back to the subject, Pep's on the set."

-- Salt-N-Pepa

As discussed in my surprise list for 2012 (and also-rans), my narrative has turned far more upbeat as we enter the New Year.

From my perch, the four conditions for a sharp upward turn in equity prices are moving into place:

  1. reduced volatility;
  2. improving domestic economic statistics;
  3. aggressive moves to address/contain the European debt contagion;
  4. and a more pro-active movement on the U.S. fiscal imbalances and pro-growth policy (in large measure brought on by a growing likelihood of a Republican presidential win in November).

On cue, we will start today's session with risk on, as S&P futures are up by nearly 2% -- also gold prices are up $25 per ounce, the yield on the 10-year U.S. note is up 7 basis points, and the euro is stronger against the U.S. dollar -- based on the developments below over the weekend and overnight: