The problem is that there is no catalyst for growth going foreward. The american consumer of the last 5 years was mostly able to buy stuff based on credit, based on overly inflated housing prices, while i agree we may be headed higher in the short term it is not sustainable if fundamentals do not follow, i can not find any fundamental possibility for the american consumer to be reinflated to old levels. Unless there is a new bubble new rallies are unsustainable. The other thing is if the government is forced to balance the budget at current levels this will be disastrous for the U.S. You can not cut interest rates anymore, and you cant cut taxes, so there is absolutely no catalyst for growth, barring some kind of unforeseen new technology bubble.
Yeah i guess the one possibility which exists is inflating out of the mess. I guess that is also one of the more likely scenarios, but what does it matter if the reason why the market goes up is inflation, the reason we try to invest is to produce money to make our standard of living better, if the only answer is inflating out of the mess it is not real money, infact if you think the way out of the mess is inflation, then i would argue that this will hurt the U.S. standard of living much worse than a flat market as the U.S. is a net importer of goods, and the USD is the most likely to collapse under the given situation. I still say the amount of money american consumers lost from the credit bubble bursting exceeds the amount coming into the system from the government.