Let's start with a few recent quotes from other publications. From Michael Kahn at Barronson Dec. 22:
The Dow Jones Industrial Average (DIA) kicked off December with a 356-point rally in two days and has not looked back. The pace of gains since then has certainly slowed, but ... stocks continue to coast higher.
From Adam Shell at USA Today on Dec. 18:
Five Wall Street heavyweights say it’s time for individual investors to shun the perceived safety of bonds — and get over their fear of the U.S. stock market — so they can take advantage of what they predict will be a third straight year of solid gains for stocks in 2011.
And from Phillip Swagel, chief economist in the Treasury Department during George W. Bush’s presidency, as quoted by The New York Times on Dec. 24:
The recovery in 2011 will be strong enough for us to see sustained job creation that will finally give Americans a tangible sense of an improving economy.
Stocks have indeed continued to coast higher: The S&P has added another 13 points to 1257 and is essentially trading at two-year highs. There has been other good news -- most importantly, the two-year extension of the Bush tax cuts -- but, in my opinion, stocks have drifted higher mostly as a result of the good spirit on Wall Street at the end of a profitable year.
The positive market action has engendered a bullish reverie and belief that the economy is turning the corner. Bullish sentiment in the weekly American Association of Individual Investor’s survey reached 63.3% last week, the highest level of optimism since November 18, 2004. Bearish sentiment fell to 16.4%, its lowest level since July 14, 2005. The Investor’s Intelligence survey -- another measure of sentiment -- registered 58.8% bulls, its highest since October 2007.
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