This column originally appeared on Real Money Pro at 7:42 a.m. EDT on April 9.NEW YORK ( Real Money) -- In mid-March, I lowered my fair market value for the S&P 500 to 1335. While a muddle-through backdrop of only 1.5% to 2.0% real GDP and modest (+5%) profit growth remains my baseline expectation, the market's risk/reward remains unfavorable. My view was then and remains that:
- market participants are incorrectly assessing the trajectory of domestic economic growth (it is slowing, not accelerating);
- the political backdrop is not market- or business-friendly, with the growing likelihood that Obama will regain the presidency and that the Republican Party will likely control the House and Senate (gridlock and failure to address our fiscal deficit holds risks to the capital markets);
- a monetary cliff is approaching at June's end ("The Liquidity Rally Is Over");
- a fiscal cliff is a threat at year-end;
- there remains risk of further debt contagion in Europe (as risks in Italy and Spain have resurfaced); and
- a meaningful reallocation out of bonds into stocks is no longer likely.