Like it or not, we now face about 20 weeks of investor anxiety where week-by-week and even day-by-day, there will be a market test of US and Chinese economic data. As well, there will be a general watch on anything out of the European Union (EU) that could disturb debt repayments, yields on sovereign bonds, the stability of the banking system and the course of Europe’s expected recession.

Sure, US company news will also be watched closely and every word Ben Bernanke utters will be analysed, dissected and assessed to ascertain if QE3 (quantitative easing, package three) – that is, more monetary stimulation – is in the pipeline for the Yanks.

Good signs

I genuinely hope QE3 won’t be needed as it will show that the US recovery has solidified. Right now, economic data is softening in the US, but this is not a reason to be too negative because there are some good signs for the future of the economy as well as Wall Street.

One of these is that of the 121 companies in the S&P 500 that have reported over the past two weeks, 81% have beaten expectations! Also, the latest US leading indicators were positive for growth ahead.

Another good fact is the market’s start to the year, with the Dow up 0.5% to 13,029.49 on Friday and it’s now up 6.65% for the year while the S&P 500 is up 9.62% at 1,378.53.

Watch this

This week I will be watching the following:

• Apple’s reporting story as it has been trashed in recent weeks with a 10% fall in share price.

• Around 180 companies will also report in the US.

• There is an interest rate meeting where US central bank policy going forward will be hinted at.

• There will be a lot of US economic data on housing, durable goods orders, economic growth and consumer sentiment.

• The French elections will be important as well, with the Socialist Francois Hollande favoured to beat current president Nikolas Sarkozy!

• Key PMI data out of China and the eurozone should tell us how manufacturing is travelling in those two regions.

• Locally, we get the crucial inflation reading on Tuesday that will seal the fate of the May interest rate cut.

Well, that’s the stuff to watch this week, but my focus is on the next 20 weeks or so from May to the end of September. These were not pleasant months for investors last year and some doomsday merchants want to predict that we will do a replay this year. Spain’s current bond yield predicament means you can’t easily dismiss these negative views.

What I like

That said I like the new stance of the European Central Bank (ECB), the build-up of euro in the EU rescue funds and the fact that the International Monetary Fund (IMF) has secured a promise from the G20 for US$430 billion worth of loans in the event of a need for emergency funding.

These safeguards were not around last year and they add to my belief in the muddle-through thesis, which I argue will end in a pretty big spike for our shares, which have lagged behind Wall Street.

If our inflation comes in on the low side this week and the RBA cuts rates next week followed by another cut a few months later, then I expect our dollar to soften, consumer demand to improve and share prices to start playing a bit of catch-up.

But we have 20 weeks of anxiety and anticipation ahead after which October arrives, and given there is a US election in November, I would expect a good old Santa Claus rally. You can nearly set your clock on the Yanks and their Christmas passion for stocks.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should, before acting, consider the appropriateness of the information in regards to their objectives, financial situation and needs and, if necessary, seek professional advice.