I am less bullish now than I was last month (So where do we stand). As I had mentioned, oil price rise was the most significant risk to any bull theory. If oil price substain above $120 for the year - GS is out speculating $150 - equity markets will struggle.
This is a major shock - not because of the absolute price, but because of the speed at which it has gone up - up 70% in 9 months. Any recession requires multiple shocks. We now have multiple ones in the US - (a) the housing blowup starting late 2006 (b) subprime debacle and ensuing credit crunch starting mid 2007, and (c) sharp oil price increase in late 07-early 08. The one that is coming next is a sharp uptick in corporate bankruptcy rates.
US imports 12mn barrels of oil per day * $30 price hike this year (from $100 in Jan 2008 to $130 today) = $130bn of -ve exports = 0.9% hit on GDP on a $15 trillion economy). Oh, by the way, that is what the Fed expected growth will be this year (0.3%-1.2%) before oil prices moved up, so the new forecast should be 0%.
India imports 700 mn barrels of oil per year * $30 price hike = $21 billion hit = 2.1% hit on GDP ($1 trillion economy). Expected growth rate of economy w/o the impact of oil = 8% - 2.1% hit from oil = 5.9% GDP growth. India will grow below 6% if oil remains at $130.