U.S.
equities defied fears about the Greek elections by rallying more than 1% last
week. The gains came as policy makers around the world reassured investors that
they would supply liquidity if the markets tumbled in the wake of the Greek
vote. The Dow rose 1.7%, or 213 points, to 12,767.17, its second consecutive
week of gains. The S&P 500 jumped 17 points to 1342.84, and the NASDAQ
added 14 points, to end at 2872.80. Stocks in the U.K., France, Germany, Spain
and Italy also climbed Friday.

Regulators
around the world made calming noises. Banking regulators indicated that they
might let banks use a wider variety of assets, like gold or equities, to meet
liquidity buffers, according to the Wall Street Journal. Speculation also grew
that central banks around the world would conduct synchronized easing if
necessary to calm the financial markets. And the Fed has a two-day meeting
ending Wednesday, at which some expect it to extend the Operation Twist
bond-buying program or restart quantitative easing.

“I’m
putting a lot of faith in markets making politicians behave and make the tough
decisions,” says John Manley, chief equity strategist at Wells Fargo
Advantage Funds, who expects the S&P 500 to remain in a trading range of
1250 to 1450. “This nonsense can’t go on forever.” Today’s
marketplace, he says, reminds him of the early 1980s, when the bond markets
pushed yields ever higher, giving the Federal Reserve the political cover to
fight inflation.

Charles Gave, GavKal Research’s chairman, is downright
optimistic about U.S. stocks. “We’ve been in a bear market for the best
part of the last 12 years” due to the misallocation of capital, he says.
China’s currency controls, the Fed’s artificially low interest rates and the
creation of the euro have caused this misallocation, and it’s about to end, he
predicts. “If the euro disappears, it’s fabulously good news. The markets
will go down for two days and up for many years,” Gave says. “We are
witnessing the end of social democracy.”

The euro’s
demise would result in money flowing out of short-term havens and into good,
independent companies that don’t rely on government spending. He likes
companies that have strong dollar-denominated cash flows, don’t need to borrow
money from banks, and don’t rely on government spending. Johnson & Johnson
(ticker: JNJ), IBM (IBM), Texas Instruments (TXN) and SAP (SAP) are among those
he sees thriving in the new world order. He’d avoid banks (Source: 
Barrons Online).