STOCKS rising, bulls rampant are motifs you might pick if designing a coat of arms for Wall Street at the moment. But the motto should read: Caveat emptor. Yes, buyer beware.

The S&P 500, a broad measure of the market valuation of the biggest US publicly traded companies, is up 20 per cent from its October closing low. It keeps climbing on fourth-quarter earnings, improving US economic data, and easing credit conditions in Europe. It now stands at its highest level since early last August.

We have already seen what is probably the first upgrade of a target level for the index this year courtesy of Credit Suisse.

The CBOE Volatility Index , or VIX, a measure of what investors are paying to protect themselves against the risk of losses, is at its lowest level in seven months.

So it raises the question: Is this another Jackson Hole moment for risk assets? At the Wyoming retreat in late August 2010, Federal Reserve Chairman Ben Bernanke sparked the second major leg of the stock market’s rally from bear market lows the year before. Is this the start of the third?

For Andrew Garthwaite, the Credit Suisse analyst behind the firm’s more bullish stance (it raised its year-end S&P 500 target to 1,400 from 1,340) there are big changes afoot. First, the European Central Bank’s long-term repo operations are succeeding in reducing stresses in the region’s banking sector. Last week, three-month dollar Libor, the cost at which European banks can borrow dollars, marked its ninth day of declines.

Analysts say heavy cash infusions from the European Central Bank since late last year and signs of revived willingness to lend by US investors in the new year show the banking system is flush with cash.

The US economy is looking stronger than thought, with notable movement in the housing market, where sales of previously owned homes just rose to an 11-month high.

A blitz of earnings and economic indicators this week will provide an important gauge of the economy’s health. The Federal Reserve’s policymakers will convene their first meeting of the year with a two-day session starting tomorrow. The Federal Open Market Committee, the Fed’s rate-setting panel, will release its policy statement on Wednesday. No fireworks are expected, but a decision to release individual policymakers’ interest-rate forecasts could alter expectations for rates on the margins.