Market Outlook: Bumpy Bull Ride Ahead

By Matthew Craft, AP Business Writer

NEW YORK -- The pattern looks eerily familiar.

The stock market scampers up to historical heights to start the year, then gets knocked on its back. Last year, worries about Greece and the U.S. economy helped flatten a rally by June. The year before, it was an earthquake and tsunami in Japan, along with a political fight in Washington.

This year, the stock market raced off to its best start since 1997. So, what could squash the good cheer this time?

The top candidates are two of the same culprits from the previous years: Europe and Washington. But the big difference is that the U.S. economy, corporate America and Europe are all in much better shape, investors say. A slump this year shouldn't be as bad.

"Even if we're tired of hearing about the dangers, dismissing them hasn't been a smart thing to do for the past few years," says Dan Greenhaus, chief global strategist at the brokerage BTIG.

History never repeats itself, exactly, but people who play with numbers for a living see patterns. Last year, strong corporate earnings and steady growth in the U.S. economy drove the S&P 500 index up 8% by the middle of February. Less than three months later, fears that Greece would drop the euro currency and a surprisingly weak employment report left the index back where it started.

In 2011, the broad-market index staggered higher to start the year, reaching a peak in May with a 9% gain. By August, it was all gone. That echoed the year before, and the year before that.

"It's funny how at the beginning of the year everybody gets excited and then by the middle of the year it's, 'Everything stinks,'" Greenhaus says.

Over the past week, Europe's troubles have recaptured investors' attention. In Spain, charges of bribery have put pressure on Prime Minister Mariano Rajoy to resign. In Italy, polls show strong support for Silvio Berlusconi, the former prime minister, in elections later this month. The scandal-plagued Berlusconi has called for billions in tax rebates and amnesty for Italians who haven't paid them.

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