Global stock markets have rallied massively from their depths earlier this year but remain at levels 25-50% below their peaks. Current levels are pricing-in all sorts of good news that is not possible:

-       3Q & 4Q GDP growth would need to show an historical increase in order to deliver on the promise of this stock market rally. This is not in the cards because the US consumer remains on life support and will not be a driving force in this economy for several more quarters.

-       Next year’s earnings would need to show the largest % gain in profits in the history of the US economy. Where is that going to come from? It is true that US companies are lean and have solid balance sheets, but earnings growth of 40%+ would need to happen. No chance.

-       Reasons why this is a junk rally: The stocks that have been the most heavily shorted have dramatically outperformed the least shorted stocks. The stocks (high quality) that usually lead a sustained market rally have lagged dramatically.