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Equities are finally starting to break higher this week. Helping push the markets higher was a stronger than expected Consumer Sentiment report for December. The headline number jumped to 74.2 from 71.6 in November. This is the highest level we have seen since June's 76.0 reading. The summer decline ahead of the elections appears to have ended and sentiment has surged +6.5 points in just the last two months. Although the Bush Tax cuts have not passed, as some Dem's need to vent their disapproval. President Obama even gave former President Bill Clinton the podium Friday to make the case for passage. Bubba looked so happy to be back in the spot light. Most expect passage in the coming week, which should give the markets another boost into the New Year. On the negative side the budget deficit for November was -$150.4 billion. That was a 25% increase over November 2009 and the largest November deficit on record. Revenues were up +12% but outlays increased by +18%. The government's fiscal year begins in October and for the first two months the deficit has totaled $290.8 billion. The government is projecting a $1.3 trillion deficit for the entire year or 9% of GDP.
Edward Yardeni said in an interview on Friday his 2011 year-end target is between 1400-1500 because of improving global fundamentals and expected earnings on the S&P of $100 in 2011. At 16 times earnings that would equate to 1,600 on the S&P.
Pimco, the world's largest bond fund, is raising its forecast for U.S. growth next year as policy makers pump in a "massive amount" of stimulus into the economy, according to CEO Mohamed El-Erian. Pimco raised their estimates for growth to the 3.0-3.5% range from 2.0-2.5%. JP Morgan's Thomas Lee raised their estimate to 3.5% and Morgan Stanley raised estimates to 4% from 2.9%. On a historical statistic, the third year of a presidential election cycle has averaged a 20% gain since 1962.