The core driver of stocks in the latest rally? -- In my opinion, a move down in the still too high Equity Risk Premium. TheS&P 500 Equity Risk Premium moved from around 6% three months ago, to about 5.3% now.

Internals in this rally are instructive:

• I took a look at a Forward 12-month Price/Earnings ratio chart this morning. It showed stock valuations stretched towards a 14 level on the S&P 500 Indexin the latest rally. Still pretty low historically.

• Consumer Discretionary and Consumer Staples are near one another at around a 16 P/E. In the latest rally, Discretionary valuations moved ahead of Staples. Consumer stocks are the growth areas of the economy and are priced as such.

• With its relatively high free cash flow yield, investor’s search for safety pushed up Telcos valuation. However, these defensive stock forward P/E valuations came down of late. They are still the highest though.

• Financials are still the worst in terms of forward P/E ratios. However, these stocks valuation multiples are among the highest accelerators in the latest rally. Less fear in financials helps.

Since lowering fear and adding risk is the story of rising S&P 500 stocks, the question I have is this.

First, what LOWER RISK is taking stocks up theMOST?

(A) A lower risk of a "Fiscal Cliff" meltdown

(B) A lower risk of a China Hard Landing.

(C) A lower risk of a European Financial/Debt Crisis.

(D) A lower risk of a U.S. recession.

(E) Other

Second, what is the most likely fear factor to REVERSE matters this year?