Dow’s rise above 11,000 lifts hopes

Andrew Milligan, head of global strategy at Standard Life Investments, expects the market’s moderate pace of recovery to continue this year as investors look forward to new stages of recovery while stumbling from time to time on bumps caused by complicated and long-lasting government debt problems left in the aftermath of the global crisis.

While stocks are in the “early stages of a bull market,” he warns of “dangers from air pockets in the world economy.” In particular, the “complex interaction between economics and politics” could hinder the markets as countries from Greece to the United States struggle with their massive budget deficits. Markets also could be rocked by the monumental struggle between the U.S. and China, and Congress’ move toward major new regulations on Wall Street, he said.

Since the stock recovery started with the revival of Wall Street firms, any radical reforms aimed at appeasing populist political interests could “significantly” affect the profits of financial firms and their ability to provide capital to the rest of the economy, he said.