We'll find out soon enough: Standard & Poor's announced that it will complete its credit review of 15 eurozone members and the eurozone bailout fund in January, in light of the disappointing Dec. 9 summit in which Germany pushed for stricter enforcement of European Union austerity rules instead of a comprehensive solution to the crisis. The analysts noted last month that there is a 50-50 chance of en masse credit downgrades, the sort of move that ignited the August stock market wipeout after S&P cut America's AAA credit rating.

Why? Political bungling, a failure to address the structural issues at the heart of Europe's woes and the vulnerability of Europe's "core" countries -- trade-surplus nations including Germany, Austria, the Netherlands and Finland -- all point to a eurozone recession because of their reliance on exports.

In fact, those countries could be even more vulnerable than troubled net eurozone importers like Portugal, Greece and Spain and suffer a larger contraction of gross domestic product in 2012 as a result. This vulnerability was on display in 2009 when GDP in four of these core countries weakened more than Spain's did. What's worse is that in 2009, fiscal stimulus helped support the situation; now it's all about austerity, with Germany set to close its budget deficit by nearly 4% of GDP between 2010 and 2013.

Not good.

Either way, Europe will soon test the markets' resolve. It will start in January when, according to UBS analysts, the eurozone will float 82 billion euros in new debt -- about $107 billion -- on the way to 234 billion for the first quarter, and 740 billion for the year. Bond investors are likely to balk, pushing up borrowing costs for the likes of Italy and igniting the next stage of the crisis.

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Earnings disappointments ahead

We'll also soon see the start of earnings season, with Alcoa getting things started on Jan. 9. Earnings season will also be another source of disappointment, according to Morgan Stanley analyst Mike Wilson, who notes that 2012 will be the "payback year" for many of the positive tail winds the global economy has enjoyed over the past three years. Those tail winds -- things like fiscal stimulus (the recent payroll tax extension isn't new, just maintaining what we already had), a weaker dollar, positive labor productivity (boosting profits) and accelerated capital spending -- are fading.

Image: S&P 500 Quarterly Results Prior to Alcoa © Factset, Thompson Reuters, Morgan Stanley

No wonder, then, that a number of companies have come out with negative earnings results, preannouncements or guidance, including Oracle (ORCL, news), Red Hat (RHT, news), General Mills (GIS, news), Best Buy (BBY, news), Walgreen (WAG, news), Tiffany (TIF, news), Amazon.com (AMZN, news)and Darden Restaurants (DRI, news).

To put it simply, reality is unleashing a pincer movement on the Pollyannaish stock market bulls. Both the macroeconomic and company-level situations are deteriorating rapidly, despite Wall Street's cute end-of-year, let's-boost-my-bonus rebound.

I know that's not a warm and fuzzy message to carry into the new year. But I've got to call it like I see it.

Political posturing

And finally, we've got to talk about the elephant in the room, or maybe it's a donkey: the upcoming presidential election and the politics of the 11 months leading up to it.

The last-minute, two-month agreement to extend unemployment benefits and the payroll tax cut in Washington pretty much summed up the fortunes of bipartisanship in Washington in 2011. The most acute consequence of this was the failure of the congressional supercommittee (birthed out of August's big battle over the debt ceiling) to find at least $1.2 trillion in revenue and budget cuts over the next 10 years.

Now, $1.2 trillion in automatic spending cuts are about to hit, focused mainly on the Pentagon.

Here's the thing: According to Fitch analysts, the failure of the supercommittee to do its work on structural drivers of the deficit -- mainly health care spending -- increases the amount of austerity and pain needed to right the ship of state later. Specifically, they believe even under an optimistic economic scenario, the failure of the supercommittee will necessitate an additional $3.5 trillion in budget cuts just to stabilize the federal debt -- which, at more than $15.1 trillion, has just crossed an oft-cited threshold, reaching 100% of GDP.