So with three quarters in the books for 2012, where do we go from here?  The first quarter of the year, the market went essentially straight up with very few pull backs.  During the 2^nd quarter, the usual post-financial crisis headlines returned including European debt and slowing domestic data; as a result the market was negative for the quarter.  This quarter, or the 3^rd quarter, was similar to the first quarter as the market rallied for the balance of the period

What’s important to note is that despite a solid stock market quarter the economic data remains poor both in this country and abroad.  My guess is that the stock market anticipated the quantitative easing program that the Federal Reserve announced and moved up through the quarter.  Good, bad, or indifferent, our Federal Reserve Chairman has announced that he will keep interest rates low through at least 2015.  This does not mean on any level that the stock market is off to the races until rates are raised.

Just as the market reacted well to QE1 and QE2, it is no surprise that it’s following suit with QE3.  However, beware that three other very important factors still remain: corporate earnings, economic domestic data/debt and European economic data/debt.  It’s clear that the goal of the stimulus is to improve the aforementioned, although thus far with round three on board a big question remains as to its viability.

For years, market experts have been trying to determine what has a greater effect on the direction of the stock market; interest rates or earnings?  It looks like rates are winning and will be low for some time so keep your eyes on the earnings and the economic data.