Much like all of 2011, this quarter was emblematic of market participants’ lack of sustained conviction in any economic outlook. While the fourth quarter was in the right direction, wild shifts in investor temperament have created a quarter-to-quarter roller coaster of hope and despair, based on little new economic input. Perception rather than fact continues to dominate. By the end of the third quarter, the belief was that Europe would fail and take the U.S. economy with it. Midway through Q4, simple acknowledgement by European officials that aggressive policy action was needed was enough to send the U.S. markets on a buying spree. Sentiment is now to the point where U.S. investors have become complacent with Europe’s problems. The current rationale: U.S. exports to Europe have a small impact on overall U.S. GDP, so a disruption won’t move the American economic needle much; we are a selfsustaining economy. Reality, as usual, is somewhere in between.

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