The Elusive Rally Endures

This column originally appeared on Real Money Pro at 8:58 a.m. EDT on May 3.

NEW YORK ( Real Money ) --

"Good information, thoughtful analysis, quick but not impulsive reactions, and knowledge of the historic interaction between companies, sectors, countries, and asset classes under similar circumstances in the past are all important ingredients in getting the legendary 'it' right that we all strive so desperately for."

-- Barton Biggs, "It's Never Easy"

It's never easy.

Against all odds and fears of a Spanish debt contagion (and a European Recession), a hesitant U.S. jobs market, signals of a hesitating domestic economic recovery (coming with a warning message of a 10-year U.S. note yielding under 2%) and concerns of a hard landing in China, the elusive rally of 2012 continues.

The market's shallow drops and more decisive rallies coupled with the perception of a more negative news cycle are driving the bearish cabal nuts.

Trust me -- I speak to all of them.

Above all, we have to remember that the history of the world is one of progress, not one of failure.

I want to make several observations -- one general one and several relating to the above concerns.

To begin with, Mr. Market rarely discounts the same event twice, so most of the headwinds mentioned in the first paragraph of this morning's opening missive have likely already been discounted in the marketplace.

  • Fears of a Spanish debt contagion and a European recession: I have long thought that Europe was heading for a recession -- see my surprises for 2011 , more than a year ago -- and that the European debt crisis was maturing or advancing from a potential fatal affliction to a bad condition that had to be continually monitored. Spain had a successful treasury auction last night. Indicating less stress, Spanish yields are down by nearly 10 basis points, and the IBEX is up 2%. From my perch, Spain is the last financial/economic saga. From here, Europe enters a period of extended recession in which the individual sovereign issues are effectively ring-fenced through massive amounts of liquidity and sovereign debt purchases (if necessary).

  • A hesitant U.S. jobs market: Many of us have highlighted the structural disequilibrium in the U.S. jobs market since 2007, caused by globalization, technological innovation, the absence of mobility (due to a 35% drop in home prices), a mismatch between jobs available and talent/skills. (I expanded upon this theme last year in my Barron's editorial, " The Threat of Screwflation .")
  • A tepid and hesitant domestic economic recovery: Given the causes, the uniqueness (balance sheet recession), the impact on our financial intermediaries, the magnitude/depth of the last downturn and the absence of pro-growth fiscal policy (owing to the continued political partisanship in Washington, D.C.), why would anyone be surprised that growth is slow by historic standards?