THE DIVERGENCE TALE

It's just about that time again when the pundits will be coming out with their 2015 stock market projections.

What will the markets do next year are some of the questions these people seek to answer. The positives, the negatives, the hopes and the fears, all of these get tossed around. 

What will be the impact of a stronger U.S. dollar? Then there's that seemingly interminable interest rate game--up, down of flat?

Overseas earnings for American corporations, how big a hit, if any, will they take in 2015?  Earnings here at home, are they really all that robust as some claim? And what of mergers and acquisitions, one of the major props for this year's market, according to some, much of it platformed on cheap money?

Will the U.S. market be the big outlier, outperforming all the others, to steal a line from Carl Sandburg, becoming the "Hog butcher for the world" when it comes to equities?

In today's Financial Times, "American bulls in charge," John Authers writes: "The logic pushing investors into US stocks is ineffable."  The problem with logic is, much like linear thinking, it doesn't always get one the correct answers, especially when dealing with humans.

And that's what comprises markets, institutions or otherwise, behind all are humans. In many cases highly unpredictable humans.

Authers then quotes a research maven: "The main drivers for the bull markets have been strong earnings, interest rates being extraordinarily low and a significant amount of liquidity. That money has to got to be invested somewhere. The music is playing and you have to dance."

Not necessarily, as Authers hints at: "But the extent of the turn around when compared to the rest of the world suggests that things may have been taken too far." What Authers alludes to is the variance in value between the European market and the U.S., citing the difference in market capitalization in 2008 and later.

"In early 2008, the total value of European stock markets briefly exceeded US market capitalization by more than $1tn."  Starting with the rally in 2009 until now, "...Corporate America is worth almost $10tn more than Corporate Europe."

Recall, if you will as Authers does, that October's 9.8% sell off is the nearest thing so far investors have seen of anything that remotely resembles a correction.

It's all a good story with lots of reasons why it will get played out. That's the argument with the most reasons why it's going to happen. But what's the story with the least arguments against something happening?

That's the one that most interests us. We now know most of the reasons why the U.S. stock market is set to continue its climb to the ether. In other words, there are few naysayers predicting a real correction in 2015.

And among them they offer few points to support the view.