Fresh from a 10-month rally in risky assets triggered by stimuli from policymakers, investors are hungry for evidence the world economy will keep going after the momentum fades and interest rates rise. The coming week should provide plenty of grist for them.
It includes US retail sales, industrial production and inflation data, the start of Wall Street's earnings season, and meetings of policymakers meeting at the European Central Bank and Bank for International Settlements. Hovering in the background, meanwhile, is a series of threats to market equilibrium - Ukraine's IMF impasse, Greece's credit battle, Iceland's row with the Netherlands and Britain over its banking collapse, Argentina's central bank squabbles with government and even UK pre-election political jitters.
This worry about fiscal issues and strained government finances could well unsettle markets, which have otherwise entered they year in much the same mood that they left the previous one, driven by cautious optimism. "This looks to be a very political year for investors," said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh.
The economy, always key, has been giving mixed signals. Friday's December US jobs data disappointed some, coming somewhat below expectations. But the numbers nonetheless indicated some improvement in trend, for example, a revision in November showing jobs were actually added in that month.
"The data shows that while the US economy is improving, the road to recovery is still going to be bumpy, and this has wider implications for the global economy and presents challenges for the consumer," said Henk Potts, analyst at Barclays Wealth.
MOMENTUM:
Up to this point, Investors have been giving the benefit of the doubt to a recovering economy, still being pushed forward by ultra-low interest rates and government stimulus packages. They have entered the year in a relatively bullish mood. MSCI's all-country world stock index looked set to gain 2 percent or more for the week.
"We think that with the economy having momentum it makes sense for risky asset classes to reflect that," said Klaus Wiener, head of research at Generali Investments in Cologne. The question is how long a risk rally is likely to go on. It is a dilemma, in fact, that a growing economy would mean an end to the stimulus that has created the momentum in the first place.
"We have structural weaknesses ... but this is being masked by the (policy) impulses," Wiener said. "The time to expect the dominance of policy over structural weakness to end is later, perhaps June to July." HSBC reckons history suggests it could come earlier. After looking at US bull markets since 1930, it found that the first bull market correction typically comes 300-450 days after a bull market begins - which would be H1 of this year if the past turns out to be any guide to the future. There are also the sovereign debt worries from Ukraine, Greece and possibly others to add some spice to the soup.
Market sensitivity on the subject was on display this week when the euro fell on a report that at least one ECB member, Juergen Stark, did not think Greece would be bailed out by fellow EU members if needed.