Despite packing a full year's worth of gains into less than one quarter the defining characteristic of equity markets in 2012 is what they haven't done. Specifically, stocks haven't gone down in any meaningful way for more than a few hours at a time.
As modestly impressive as the 9% year-to-date gains are, the real questions are what could break the rally and what's driving us higher so far? To help find an answer Breakout welcomed Michael Purves, chief market strategist for BGC Financial.
In the attached clip the man who gave us the spot on "Wolf Market" call in 2011 asserts that the flow of "incremental good news" combined with global central banks' obsession with "the removal of tail risk" have been the catalysts behind the rally.
"Fat Tail Risk" refers to the 100-year storms that have buffeted stocks every 3 or 4 years since Long Term Capital helped bring the idea to our attention in the late 1990's. A fat tail is one in which events thought to be exceptionally rare turn out to be rather common. When the supposedly well-crafted mortgage backed securities were all sold in one direction by the theoretically diverse and hedged financial concerns in 2007 and 2008 a modest slowing of the housing markets spiraled into a global meltdown.Read More »from What Will Make or Break the Bull Market?