Kass: How a Year-End Rally Could Materialize

In order to stage a substantive year-end recovery, Mr. Market needs some luck. President-elect Barack Obama needs to connect on a long bomb; he needs a Hail Mary. It is not an impossible task. What the market needs more than anything right now are some breathtakingly bold initiatives from engaged and bright leaders who address unconventional problems with unconventional remedies.

Stated simply, in order for the markets to rally into year-end, we need "shock and awe" policy and personnel decisions from the President-elect, and we need them to be announced as soon as is practically possible.

Over the weekend, Barron's cover story, "Dear Mr. President," made some recommendations aimed at "bolstering the confidence of consumers and businesses [to] get the economy back on its feet and restore order to financial markets."

Here is my take on some of the events and policy measures that might contribute to a sharp year-end rally.

Obama: Yes, He Can!

"Going for him, too, is a broad sense that the problems the President-elect faces are so deep, from war and peace to economic dislocation, that voters will be patient, give him time, and be grateful for any progress. Modest improvements will be seen as small triumphs."

-- Peggy Noonan, Wall Street Journal

A broad sense of anticipation and expectation greets the Obama Administration in January 2009, but it now must be earned. Americans want Obama to do well, as Americans want to prosper. The President-elect must be bold and timely as he now confronts a more difficult rival than Senator McCain -- the economy.

Recommend a massive tax stimulus. Senator Obama should be prepared to stand behind a massive fiscal stimulation package that represents as much as 4% of GDP, or at least $400 million, introduced in two stages. He should emphasize his intention to promote the package immediately following his inauguration.