NEW YORK ( ETF Expert) -- Economic uncertainty has been monstrous, from the cloud hanging over end-of-the-year tax policy and budget negotiations to a down-to-the-wire national election. And that doesn't even include ever-present euro zone squabbling over bailouts for austerity.
In spite of the question marks, stock assets continue working their way to higher ground. Remarkably, they've done so with limited resistance and a relatively low level of volatility. The CBOE VIX Volatility Index (VIX) remains near levels that some might even describe as complacent.
Is the S&P 500's success simply a case of the smart money climbing a wall of worry? There may be some of that. Abysmal 2012 performance by hedge fund managers may also be contributing to short covering and a reluctant conversion to "going long" on stocks.There is one thing that nearly everyone agrees upon, though. For worse or for better, central banks around the globe have committed to bailouts and unconventional methods of easing. This fact seems to be encouraging market direction more than any other. There's always the possibility that the markets have already moved higher in anticipation of Federal Reserve and European Central Bank interventions. If that turns out to be the case, we might see an ugly "sell the news" event rather than a consistent registering of multi-year stock highs. In my estimation, there is at least a 50% chance that the Fed will hold off announcing specific quantitative easing measures on Thursday (9/13), if that easing involves the controversial electronic printing of money. I think it is just as likely that they will tease a future "QE3 initiative, choosing to wait until after the election and subsequent jobs reports. Indeed, stocks may react negatively at first. However, with the "QE carrot" still out there, the circumstance should eventually bolster reflation-oriented assets. Moreover, some of those reflation-oriented assets -- precious metals, materials, natural resources and resources-related companies -- have been beaten down for quite some time. Assuming the world's central banks (e.g., People's Bank of China, European Central Bank, U.S. Federal Reserve, etc.) are able to follow through on anticipated/planned interventions, these longer-term underachievers may become the "Belles" of the ball.