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Steven Michael The author, Steven Michael, is the Founder, Principal & Chief Investment Officer of Stonehenge Asset Management. He has over 25 years experience in the alternative management space. His extensive financial career began in 1985 on the trading floor of the Chicago Board of Trade (CBOT). He is also a member of the Chicago Mercantile Exchange (CME).

The S&P is up 10% already it the first quarter of 2012. We have had steady growth in the economy and in employment. The markets and the fed have discounted 2.5%-3% growth for 2012.

Although, we are still bullish on US equities, there are risks to this strategy. Ironically, the largest risk may be growth that is beyond the expectations of the Fed and the markets. Before I explain, I would like to discuss the some of the other risks to this.

It seems that oil prices are of much concern to the continued equity rise. Getting beyond the politics and rhetoric of news coverage, oil is probably underpriced relative to geopolitical risks which currently exist. What affects the equity markets are “oil shocks” not just generally higher oil prices. What is an oil shock? Oil would need to rally 80-100% in less than a year to create an oil shock. Higher oil prices alone, will not cause equity price break downs alone. Europe has learned to live with much higher gasoline prices. The fact is that without this type of shock, equity prices will remain ambivalent and the trend of oil consumption relative to GDP and the oil cur......................

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