There has been a fierce tug of war between the bulls and the bears in the US stock market since the beginning of the year with no clear winner so far. All that the bears and the bulls know for sure is that they have rope burn. It might continue to be this way through the end of this year and into next.

Nevertheless, I am pulling for the bulls. Indeed, my S&P 500 targets are 1,250 by the end of this year and 1,400 by the end of 2011. This month, the bulls regained the ground they lost during the spring and summer. The S&P 500 is now up 1.8 per cent since the start of the year after being down as much as 8.3 per cent on July 2. That's quite impressive given widespread concerns about a double-dip recession in the US, a sovereign debt crisis in Europe, and a property bubble in China.

The eventual winner of the tug of war will depend on whether deleveraging puts the brakes on the global economic recovery or whether global economic growth has enough momentum to ease the burden of all the debt that has been accumulated in recent years. In past recoveries, growth bulls have always triumphed over debt bears.

Today's pessimists foresee a grim 3D scenario for the global economy: debt, deflation, and depression. In their opinion, private sector debts have become too burdensome forcing consumers and businesses to retrench. In this scenario, a deflationary debt spiral is likely. That could lead to a depression and debt defaults. Governments can't do much to avert this outcome because they've borrowed too much and risk a sovereign debt crisis if they try to borrow much more. The major central banks are also stymied since official interest rates are near zero, and can't go lower.

David Fuller's view In response to the article above, here are the salient points, as I see it: 1) Many Asian markets uncoupled from Wall Street in June and have been leading upwards ever since; 2) there is little deleveraging in the developing (progressing) world other than China's property market and these economies have plenty of momentum; 3) deflation and depression is a US-centric view and inflation is a bigger concern in stronger economies; 4) no government stimulus is currently required in the progressing economies and most did not even experienced a recession in 2008-2009; 5) I think the bull points cited are correct.