With only a few trading days left in the year, the market is poised for another year of double digit growth. Not only is a low-teens return solid in its own right, but it continues the recovery from the lows of early 2009. That said, the market has nearly doubled from those lows and it is hard to see how the market has not overshot the actual level of economic recovery in that time. The question has to be asked, then - can the market continue to grow in 2011? (For more, check out 2010's Highest Performing S&P 500 Stocks.)
The Bad: Debt, Debt, Everywhere
Simply put, there is a lot of debt out there right now. The U.S. federal government has been borrowing heavily to finance ever-larger deficits and state and local governments likewise find themselves straining under debt obligations taken on during the best years of the housing bubble. As Iceland, Greece and Ireland have ably demonstrated, there comes a point in time where debt can no longer be ignored or indefinitely rolled over.
Whether or not the U.S. is close to that point, the fact remains that increasingly difficult decisions are on the docket for governments. Governments have two choices in dealing with debt (assuming that simply not paying it is not really a valid choice) - cut spending or raise taxes. Neither would be good for the markets or investors in the short-run, though an argument can be made that lower spending would be "less bad" as private companies could step in to offer those services at perhaps a lower overall net cost to consumers.
Please follow the link for the full piece:
http://financialedge.investopedia.com/financial-edge/1210/Can-The-Market-Continue-To-Grow-In-2011.aspx
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