A Strong (and Dangerous) Rally Ahead?
Quietly and steadily, the S&P 500 sits at 1414, a level not seen since before the Lehman Brothers debacle. Here we sit in the midst of a eurozone financial meltdown and the U.S. markets are quietly experiencing a strong, albeit quiet rally. The irony is that it's precisely because of the turmoil in Europe that this rally is occurring. Europe is also the reason that 2012 could be a record breaking year for equity markets, but also a year fraught with dangerous underpinnings.
Europe is a mess and China's economic growth is slowing. Against that backdrop is the U.S., the biggest and strongest economy that also happens to offer the deepest and liquid markets. In such an environment, capital eventually flows out from places like Europe and China and finds its way to the U.S.. And the fact is, U.S. equity valuations are not excessive. Despite the continued appetite for supposedly risk-free Treasuries, the relative attractiveness of U.S.-based stocks, namely large-caps, has provided a floor on the downside....301 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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