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I'm inclined to agree, because without real and sustained underlying growth, corporate profits--and thus stock prices--can levitate for only so long. (In fact, we already saw a dip after third-quarter earnings.) In some ways, we are exactly where experts like Harvard economist Ken Rogoff would say we should be at this stage of a recovery from a post-financial-crisis recession. Central bankers have primed the economy to give people breathing room. Consumers have repaired their balance sheets and are spending.
What's missing here? Politicians and policymakers who have come together to make a job-creating and investment-inducing grand bargain over debt reduction. While they'll most likely find a way to avert the fiscal cliff, there's yet another bout of Washington gridlock making corporations nervous about spending in the short term. Things would be worse if not for the fact that the rich-country investment alternative is Europe, and it's quite telling that U.S. banks have reduced their exposure not only to euro weaklings like Spain but also to Germany. They believe there's a good chance that the crisis could damage even the strongest link of the euro zone.
What's particularly troubling about all this is that when the market finally dips longer-term, we'll see a further divide between corporations and consumers. While the former will mostly fly above the troubles of individual nations, relocating operations wherever it's most efficient, the latter will be left looking not only at smaller retirement portfolios but also for jobs that are still hard to find at home.