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This blog post originally appeared on RealMoney Silver on Nov. 12 at 8:15 a.m. EST.

The message of the markets over the past few weeks is that, with increased certainty, investors are growing more comfortable with the forecast of a smooth and self-sustaining economic recovery in 2010 and beyond. Many now have even adopted the view that the current cycle is the start of a normal multiyear recovery that could resemble the average 45-month expansionary phases that have typically followed a recession.

The previous consensus forecast of a shallow recovery has now been displaced by a far more optimistic projection. Aggressive fixed and variable corporate cost cuts (and the productivity gains and margin expansion that follow) are now being seen as providing the underpinning to a leveraged and positive impact on 2010 corporate profits. Next year's

S&P 500

earnings forecasts are now moving toward $80 a share (as UBS estimated yesterday), a level that was unimaginable three to five months ago.

By contrast, I have argued that a number of

nontraditional headwinds

coupled with a weakened consumer would result in a degree of uncertainty and the likelihood that a wider range of economic outcomes are possible, some of which are not market-friendly. While I am respectful of Mr. Market, there is no message in the recent market upturn nor, more importantly, in recent economic releases that lead me to change my baseline view that market and economic challenges will rise anew next year along with the withdrawal of stimulus and the threat of higher taxes.

History shows that sentiment, forecasts and price targets can get intertwined; they can influence each other and can be detached from reality both in periods of depression and in periods of elation. The former occurred in March 2009 when the S&P 500 put in a

generational low

, and perhaps the latter is currently in the development phase.

It is hard for me to know to what degree the optimism in the market and in the revised S&P price targets is sentiment-driven or whether it is entirely a fundamentally based belief. Also, it is a challenge to pin down to what degree the "better" environment has been discounted at 1,100 in the S&P 500.

We simply won't know until after the fact.

In bull markets, there is often no clear demarcation between fantasy and progress. While I am of the view that we are now on a slippery slope, that doesn't necessarily mean that the markets won't continue to advance; they can as the crowd usually defeats the remnants. The animal spirits are in force, and the momentum remains undeniable, but we can't lose sight that markets often overshoot.

I do believe with some certainty that the market's vulnerability to disappointment and/or exogenous events has been elevated and that many apparent warning signs -- for instance, a 17.5% underemployment rate, weak consumer and small business (National Federation of Independent Business) sentiment, the unrelenting increase in the price of gold, a steadily declining U.S. dollar, the specter of cost-push inflation from higher commodity prices and so forth -- are too comfortably being ignored or are being rationalized away in a tide of rising world stock prices.

I now see a far less attractive risk/reward ratio than at any time in 2009 -- maybe longer.

Doug Kass writes daily for

RealMoney Silver

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At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, although holdings can change at any time.

Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.