IMO I think the markets are mistakingly overlooking the unrests in the Middle East. I think this could escalate into something very nasty impacting the wider world.
It all started off in Tunisia
"The demonstrations were precipitated by high unemployment, food inflation, corruption, a lack of freedom of speech and other political freedom and poor living conditions. The protests constituted the most dramatic wave of social and political unrest in Tunisia in three decades and have resulted in scores of deaths and injuries, most of which were the result of action by police and security forces against demonstrators"
I think when taking into account that the world is likely to have a Oil supply shock in the coming years all you need is one of these Arab Oil exporting countries to have a problem exporting Oil. Then the likes of Saudi who claim to have spare capacity are put under pressure especially when Wikileaks claimed the US was concerned about Saudi Oil reserves & its ability to pump more Oil etc.
I think if these protests breakout in Saudi or Iran to the extent we saw in Egypt then it will have much wider implications and there will be every chance of a 1970s style rise in Oil prices. This could then escalate into protests in the western world as the cost of living goes to unbearable levels due to high Oil prices.
Afterall these protests were precipitated by high unemployment, food inflation, corruption, a lack of freedom of speech and other political freedom and poor living conditions. The bold is already present in the UK and US for quite a few people [maybe not so much the poort living conditions] and I think there is only so much more the public can take!
If we did'nt have QE from the US/UK perhaps we would'nt have these high levels of inflation as afterall we were very much on the road to deflation back in 2008.
I still maintain the view that markets will peak out in 2011, towards the end of 2010 I said I was expecting a decent 1H and that is what we have had so far. I'm not so sure it will be so decent after May/June though.
For the markets to drop significantly some major event has to occur and that may well be the unrest in the middle east. The markets were always going to be propped up by the Fed & that is the main reason this bull market has lasted so long.
Gerald Celente predicted all this unrest in the last 2-3 years and Marc Faber has said we will go to World War 3 eventually as that seems to be the only way the governments around the world know how to resolve their economic problems.
I just hope they are wrong and all this is sorted out sooner rather then later!