Good thoughts here from David Rosenberg who appeared on Surveillance with Tom Keene yesterday. He says the market is rallying because it’s been given no reason to decline. In essence, the key tail risks have been removed from the market:
- Europe didn’t fall apart.
- The fiscal cliff didn’t destroy the US economy.
- China achieved a soft landing.
He also touched on the recent declines in gold. Rosenberg says that the brighter outlook means golds hedging component no longer serves its purpose. I’d add that a better outlook means less central bank easing and the potential for higher real rates.
See the full interview here: