The following is excerpted from the November 9 edition of “Breakfast with Dave,” a publication from the Canadian research firm Gluskin Sheff:David Rosenberg

Cause for Pause

So today I try my utmost to reveal some silver linings in the very latest data points.  The economy is still on such fragile ground that every opportunity should be taken to highlight the rare piece of good macro news when it arrives.  No different than my approach yesterday when I attempted to strike up a hopeful tone for compromise on the political front (though admittedly this will come down to whether the GOP is going to be prepared to raise revenues and the extent to which the President recognizes that he does not really have a meaningful mandate with half the voting population either splitting their ballots or opting for Mitt Romney.  As the Economist points out, the 2.4 percentage point gap in the popular vote that pushed Mr. Obama back into the White House was the lowest spread ever for a successfully re-elected president [Ed. note: According to other data, more recent than the Economist's, Obama’s winning percentage in 2012 (2.68%) was actually higher than Bush’s winning percentage in 2004 (2.46%).]).  I retain an extremely cautious view on the economy and the stock market as an asset class.  The election is behind us.  The Fed has spent its last bullet.  We are at an inflection point of the earnings and sales cycle.  The fiscal cliff, the Chinese political transition and the spread of the euro zone recession to the north lie ahead.

It is interesting to see the action in the equity markets, to be sure.  We just endured the sharpest two-day decline of the year. The credit markets have behaved much better, and while spreads have widened in recent weeks, for the BBB space, they still narrowed in some 30 basis points since mid-September while the stock market has been wobbly at best.  Then again, you buy equities for the earnings and you buy corporate bonds for the balance sheet – with $1.7 trillion of cash sitting on business balance sheets, I’m less worried about the fiscal cliff negatively affecting default risks than the impact it will have on profits.

After QE3+ was announced on September 13th, the widespread consensus view was that the lagging hedge funds were going to be forced into the market and that the major averages were going to hit new highs going into the end of the year.  And that it would be perfect timing to have the election uncertainty behind us too, irrespective of who took the keys to the Oval Office.