Delicious Dozen

Indeed, the pain trade of a rising stock market has been on center stage since my expectations of the rip-your-face-apart rally commenced, on cue, four days following the column's publication and two trading days after the June 1 market schmeissing.

An encore performance of the pain trade occurred last Thursday and Friday, even in the face of disappointing domestic economic releases (retail sales, initial jobless claims, confidence, industrial production and New York manufacturing activity) and the slow-motion train wreck of the eurozone (which featured a sharp rise in Spanish bond yields).

Given this historical investment perspective, here are the delicious dozen -- 12 factors that could unleash a powerful and unexpected upside move in the U.S. stock market over the balance of the year:

1. Muddle-through U.S. economic growth. By my calculation, market participants are now discounting sub-1% real growth in the U.S. economy, which will likely prove too pessimistic. Indeed, we are entering a relatively pleasant period in which interest rates, actual inflation and inflationary expectations remain low even as the domestic economy grows at about 2% (in real terms) in both 2012 and 2013. The Fed twists again (like it did last summer) and other influences (e.g., the perception of a more favorable Political path and some other factors listed below) contribute to buoying consumer and business spirits and serve as a catalyst to acceleration in growth in late fall/early winter. Pent-up demand for business fixed investment and durable spending (autos and housing) is unleashed, surprises to the upside and contributes to the increased probability that the U.S. economic recovery is self-sustaining.