Recent trends

Today's US ISM non-manufacturing index for November came in at 54.7%, slightly better than expected and indicates a continuing and steady expansion of the main US economy since the 2008 crisis. Employment sub index went down to 50.3%, a 4.6 points decrease from last month, possibly reflecting the Sandy effect and  the holdup due to the "fiscal cliff" (or "deficit reduction cliff") worry.

Compare this to the US ISM manufacturing index released a few days ago, there is an important contrast. Manufacturing had been leading the US out of recession until recently. Last month the manufacturing index dipped below 50 (contraction) at 49.5%, the lowest in 3 years. It is hammered by the weakness in Euro zone and Asia.

US domestic recovery, powered by consumer spending, however, has an underlying strength. Auto sales, retail sales, housing constructions have been relatively strong in recent months. Consumer credit has expanded, especially in auto loans. Home prices have started to increase YoY, which is expected to continue given the demographic trend and the Fed's easing stand.

While consumers are spending and relatively optimistic, businesses have become very cautious by piling up cash and holding off hiring. Resolution of the "fiscal cliff" issue could probably help bring these divergence back into a better balance.

Overseas, it is possible that China's new leadership could deepen economic reforms and provide a moderate stimulus to help shore up its growth. Continue to grow above 7% is crucial for China.

Even Europe could see more stability going into 2013. Both Italian and Spanish yields have come down substantially in recent months. ECB has been a tremendous force in stabilizing the financial sectors. The real economy however will continue to drag.

Given these major trends, there is a real opportunity for the equity market in 2013. Buy in dips.