The market euphoria since November is all based on expectations of future US policy. Rational expectations of future policy and not the current economy are driving markets. Albeit the US economy has positive sentiment and has shown economic growth improvement, there are still headwinds that may only be mitigated through a change in policies. 2017 will be defined by the implementation of those policies and their effectiveness at reducing the ongoing credit recession.

Of course, there can be unforeseen events that will take over market directions. These events are the same downsides that have been overhanging the markets for the last few years. China debt issues have not gone away. European banking problems will still provide intermediation risks. A stronger dollar will impact EM debt leverage. A decline in commodity prices will impact EM growth. Geopolitical risks can cause market caution. All of these events can move to the forefront, yet US fiscal policy if success may delay or override the worst of these issues this year.