The retail sales air pocket has the markets spooked. Lots of talk about how stocks are going to test their November lows before this is all over. FUD (fear, uncertainty, doubt) is very much in the air. But as this chart shows, one measure of FUD, the Vix index, has improved significantly since the November lows. There really isn't as much uncertainty today as there was just a month or two ago. We know more about Obama, we know more about the economy, and key prices (e.g., swap spreads, the TED spread, etc.) are improving on the margin. The Fed remains extremely accommodative, and the risk of a banking system collapse is an order of magnitude less than what it was a few months ago. The market has been priced to a catastrophically bad economy, but every day it seems less likely to happen.
Less uncertainty should lead to higher, not lower prices.