Having come so far so fast, rational observers are prudent to expect that a correction is inevitable. It is, but the question is when it will happen. This is being written on September 15, and it's been over 135 days since the March 9 low, giving us over 135 days without a 10% correction. By the time you read this, that correction may have happened.

None of the observers I've heard seem to think we're at the start of a long-term secular bull market. Most seem to say we're in the process of returning to a new equilibrium, and the pre-Lehman collapse level of 1,200 or so in the S&P 500 seems like a logical place to search for it.

For her part, Sonders describes the recovery as a "square root" phenomenon, meaning the economy and markets are likely to recover to a certain level and then flatten out. The V-shaped rebound in equity prices has failed to materialize in the real economy, and at some point the markets will say, "Show me."

None of our long-term structural problems have been resolved. Sonders expressed hope that employers overreacted and eliminated too many jobs late last year and early in 2009, but she's not betting the ranch on a huge rebound in employment.

The debate over which is the bigger threat-inflation or deflation-has powerful arguments on both sides. While the stock market hates extremes in either direction, it tends to thrive in times of mild deflation. Given the explosion in the federal deficit, clients may fear inflation more, but Sonders said that until the velocity of money accelerates, price increases should remain subdued.

Equally troubling is the way Main Street so far has failed to bounce back while Wall Street giddily returns to its old ways. Next time around, the nation may find that the financial system has created a group of megabanks that are too big to save.

Meanwhile, Sonders thinks global currency markets could move to a system where the U.S. dollar is no longer the world's lone reserve currency, but one of several reserve. That movement, however, is likely to be gradual.

All that is out there in the future. For now, the search for a new equilibrium seems to be steamrolling the bears.

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