The US stock market recovered some poise in December. But while we do not expect equity prices to collapse in 2012, we think there are three reasons why they may continue to languish – our end-year forecast for the S&P 500 is 1,150. First, the prospects for the economy are bleak even if a renewed recession in the euro-zone is unlikely to be especially damaging to the US. Second, profit margins are very stretched with labour’s share of income in the non-farm business sector at its lowest level in at least sixty years. And third, valuations are not especially attractive from a historical perspective.