SO, OUR FUTURE ISN’T WHAT IT used to be, but that hasn’t stopped traders from eagerly looking ahead. Stocks kicked off this month with a 3.7% three-day pop that already has some breathlessly hailing December as the new January, and which handily wiped out November’s 0.2% correction, itself just the first loss in three months. Instead of taking it easy, money managers are raring to go, perhaps because quite a few are lagging behind the market after its latest spirited spurt.

The early trickle of 2011 forecasts from Wall Street firms dutifully lists the roster of risks—fiscal constraints, rising commodity costs, the fading high from the central bank’s money-printing spree, Europe’s debt bill, China’s constricting credit and tension in Korea. But no one is calling for calamity, and the consensus seems to expect the artificial swell of money and benign interest rates to goose corporate profits while the economy plods along.

Even Friday’s jobs report, which showed just 39,000 new workers hired in November, failed to thwart the market or rattle payroll stocks from Automatic Data Processing (ticker: ADP) to Paychex (PAYX). Protracted unemployment will merely goad our government to extend its policy largesse, and while we may lament the fiscal wantonness, we’re not betting against its impact in the stock market— just yet. An extension of the Bush tax cuts or monetary stimuli from Europe can further hurt those betting against the market.

Meanwhile, those who have jobs and who’ve paid down some debt are shopping. November retail sales were better than expected, consumer confidence recently ticked to a five-month high, and vehicle sales exceeded an annualized 12 million each of the past two months. Despite sluggish growth, “pent-up demand by businesses, along with plenty of cash and low interest rates, provide fuel for growth,” says a well known chief market strategist. Improving profit margins also helped companies report better-than-expected profits for seven straight quarters, and Deutsche Bank chief strategist Binky Chadha argues that margins haven’t peaked yet.

The Dow Jones Industrial Average added 291, or 2.6%, to finish last week at 11,382. The Standard & Poor’s 500 is a point from reclaiming its 2010 peak. The Nasdaq Composite Index tacked on 57, or 2.2%, to 2591, while the Russell 2000 racked up its fourth gain in five weeks to jump 24, or 3.2%, to 756. The yield on 10-year Treasuries rose above 3%, the highest since July, while crude oil climbed to a 26-month peak above $89.

Today, the cost of money has never been lower, corporate bond yields have never been lower, and company balance sheets have never been stronger, notes Goldman Sachs strategist David Kostin. For example, nonfinancial Standard & Poor’s 500 companies hold more than $1 trillion in cash, roughly 10% of the market’s capitalization.

Goldman expects stock buybacks to increase 25% in 2011, dividends to grow 11% and companies to plow $240 billion in cash toward mergers. The firm’s economists see the global economy growing 4.6% next year, while abundant liquidity holds the 10-year yield to 3.25% by late next year. Against this benign backdrop, Kostin is penciling in profit growth of 12% in 2011 and sees the S&P 500 pushing 1450 in a year.

With Wall Street so bullish, it isn’t surprising to find professionals’ buying powder depleting. Of course, cash as a percentage of stock mutual funds’ assets decline as their stock portfolios rally, but “we are currently as fully invested as we were at the 2000 and 2007 peaks,” notes Ned Davis of Ned Davis Research.

So the question remains whether indifferent individual investors will regain their appetite for stocks in 2011. They have yanked money from U.S. stock mutual funds nearly every week this fall even as the market rallied. Will rising stock prices and Wall Street’s enthusiasm change their mind? (Source: Barrons Online)