When is a stock market return of minus 1 per cent in 12 months a great buy signal? When the rest of the world has just fallen between 5 per cent and 25 per cent.
Amazingly, a dip of just minus 1 per cent last year was enough to make the US the world's best-performing major stock market. China, by comparison, fell 20 per cent and India dropped close to 30 per cent. Investors had grown so accustomed to being gloomy about the good old US of A, this relative "outperformance" took most of them by surprise.
It was a pleasant surprise, however, and has been compounded by a string of positive economic data on jobs and manufacturing. Suddenly, everybody wants a piece of the US.
By mid-February, the North American index was up 8.5 per cent in 2012 and the Dow Jones Industrial Average touched a post-Lehman high of 13,000 on February 28. On Monday, the index was up 6.07 per cent for the year and the Dow Jones was trading just below that psychological threshold of 13,000. US stock markets have enjoyed their best start to a year since 1997. America ain't dead yet.
So is this a false dawn or could 2012 really be America's year?
You can't help but be impressed by the resilience of the US. Last year, its economy managed to withstand the euro-zone crisis, the Japanese tsunami, oil price spikes, Middle East unrest and repeated toxic exposure to Kim Kardashian.
Manufacturing is now healthily above its five-year average, according to the ISM Manufacturing Index, which is good news for GDP growth, jobs, capital spending and world trade generally.
Retail sales are climbing and the country is also creating jobs. After peaking at 10 per cent in 2009, unemployment has fallen to 8.3 per cent. Non-farm payrolls have increased for the past 16 months, during which time 2.5 million jobs were created. That is slower than in previous recoveries, despite a worrying growth in hidden unemployment, but this is still welcome news.
The Federal Reserve's commitment to squeeze base rates until late 2014 has also boosted investor confidence. Events elsewhere have helped, notably the European Central Bank's decision to flood EU banks with liquidity in a bid to prevent them going into meltdown.
Most analysts expect the US to be the fastest-growing western market in 2012, with GDP growth tipped at about 2.8 per cent. By contrast, Canada, Europe, the UK and Japan will be lucky to notch 1 per cent.
The US is rediscovering its natural optimism, says Cormac Weldon, the head of US equities at Threadneedle, a fund manager. "When you look at Europe, the UK and Japan, it is all austerity. When you look at the US, you can see growth. And growth is exactly what you need to escape the current fiscal and monetary mess."
Unlike Europe, the US has got most of the pain out of the way. "When the US is in crisis, it tends to address its problems quite quickly. Take General Motors, which declared Chapter 11 bankruptcy in 2009," Mr Weldon says. "It has turned things round and is once again the world's number one car company. Property prices have fallen sharply, but that means housing is more affordable than it has ever been."
Even the banking system is on the mend. "The crazy lending has either been paid off or written down. The US banking system is now well capitalised, while Europe is still in dire straits."
As prospects for jobs improve, so does consumer confidence. "The recovery won't happen overnight, but it has started," Mr Weldon says.
The US also has another trick up its sleeve. Or rather, buried deep below the ground in its sedimentary rocks. Shale gas. Technological advances have made this gas easier to access on a commercial scale, potentially giving the US a massive source of cheap energy.
"Shale gas could even help to make the US self-sufficient within 10 to 15 years. If that happened, the impact would be massive. It would be great news for industry, jobs, farming and consumers. It might also help to put a cap on future oil price rises."
Anybody investing in the world's biggest economy must realise that it still faces plenty of challenges, Mr Weldon says. "It needs to come up with a viable plan to address its national debt, which is heading towards US$15.4 trillion [Dh56.5tn]. It spends 50 per cent more on health care per capita than any other developed country and as the population ages, that must be tackled. If gasoline prices rise further, this could put the brakes on the recovery."
But for now, it looks like the US is getting its mojo back. "The US has the capacity to reinvent itself. Most importantly, it has the capacity to grow. That makes it a good place to invest right now," Mr Weldon says.
The US recovery even withstood the loss of its prized triple AAA-rating last August, when Standard & Poors, the ratings agency, cut its credit rating by one notch to AA-plus, citing the government's budget deficit and rising debt burden.
Analysts had predicted a slump in the dollar and soaring borrowing costs for the US government, companies and consumers, but it didn't happen. Even the threat of a second downgrade in the next 12 to 18 months inflicted minimal damage.
The US dollar, the world's reserve currency and a safe haven in times of trouble, has been astonishingly strong, says Steve Gregory, a managing partner at the Dubai-based Holborn Assets, the financial services company. "The euro is seen as too risky. The Swiss franc was a safe haven until Switzerland pegged its currency to the euro to stop it becoming overvalued. That day, it fell 9 per cent against the dollar. With so many investors reluctant to invest in bonds and stocks, there are few places to park your money apart from US dollars. The question is, can it last?"
This is a question every investor in the US should ask. "It will be no fun buying US stocks, funds, bonds or property if the dollar subsequently declines in value. Unless you are paid in US dollars or a currency [is] pegged to the dollar, the value of your holdings will also fall," Mr Gregory says, adding that too many investors ignore currency risk.
"If the US stock market goes up 10 per cent and the dollar also rises 10 per cent, you have a 20 per cent gain. But it can also work in the other direction."
US share prices may continue their recovery this year, but any gains may be offset by a fall in the value of the dollar against rupees, roubles, rands and reals.
Every investor should have at least some exposure to the US, Mr Gregory says, and recommends mutual funds Fidelity American and JPM American Equity. "But you should also spread your risk and currency exposure by looking for more global investments as well."
Patrick Connolly, an investment analyst at AWD Chase de Vere, a brokerage firm, is positive about the prospects for US equities, at least in the short term. "We are currently overweight in client portfolios, but in the longer term, investors need to see decisive action to cut spending and reduce debt. At present, this is clearly lacking."
Mr Connolly recommends two actively managed mutual funds: Threadneedle American and Neptune US Opportunities. "The US stock market is so intensely researched that it is difficult for any fund manager to consistently beat the index. If you prefer a low-cost 'passive' index tracker fund instead, I would recommend HSBC American Index."
The global economy faces three major risks right now, says Richard B Hoey, the chief economist at BNY Mellon, a fund manager. "European financial stress, the Chinese property market and the Middle East, due to oil supply vulnerabilities."
None of these stem from the US, where Mr Hoey is bullish. "Unlike many other countries, the US economy is likely to grow faster in 2012 than 2011."
Americans have put off buying new cars and houses, but their appetite should return as the recovery gathers strength. "If necessary, the Fed is likely to respond to any shortfall in growth with additional easing steps, potentially including a QE3 [quantitative easing] programme focused on the mortgage sector." The danger is that tackling the huge US budget deficit is being pushed further and further into the distance.
"High budget deficits should persist for many years, but low interest rates make them easy to finance for now," Mr Hoey says.
The 2012 US recovery has history on its side, says Kully Samra, the branch director at Charles Schwab, the stockbroking company. "In January, the S&P 500 rose 4.4 per cent, its best start since 1997. The S&P has gained over 4 per cent in January on 17 other occasions since 1950. In 16 of the 17 cases, the market continued to move higher, with a median gain of 15 per cent between February and December."
The US is still vulnerable to global events. If Greece torpedoes the euro zone, the Chinese housing bubble bursts, or the Iran crisis turns nasty, the US won't escape the fallout.
Nor should investors expect a return to the type of growth we saw in the 1990s. Once the recovery is established, the Federal Reserve will call off QE and start hiking interest rates.
The nation will eventually finally have to tackle its debt mountain. It took 30 years to create, so it could take almost as long to clear.
Then there is the minor matter of a US presidential election. Stock markets have a habit of rising in an election year, as the incumbent fires up the economic feel-good factor and postpones tough decisions. Markets often slide afterwards, as unpopular choices are made.
2012 may be a positive year for investors in the US. What comes next could be more of a struggle.
