Our country's fall classic recently ended in dramatic fashion with the New York Yankees winning their unprecedented 27th world championship. Hideki Matsui became the first Japanese-born World Series MVP by hitting a home run, double, single, and driving in six runs in the decisive 6th game victory for the Bronx Bombers. Matsui is a legend in his native Japan and will long be remembered for his dramatic performance on the grandest of baseball stages, Yankee Stadium. In sports, producing your absolute best at the most dramatic moment to propel your team to a championship, is about as good as it gets.

With the end of the year in sight, there is no less drama in the financial markets. The October edition of the Bank Credit Analyst offered a particularly telling comment. In discussing the stock market rally from the March lows, the article states, "This may go down as one of the most widely distrusted equity rallies in recent memory, with many investors remaining on the sidelines." The author's point is well taken and is supported by the fact that most confidence indicators remain in the doldrums. The economic picture is certainly confusing and there is a lot at stake as we try to recover from one of the most traumatic periods in history.

But not all is gloom... A dose of ingenuity, advanced technology, and old-fashioned hard work are driving impressive gains in productivity. In the most recent quarter, non-farm productivity rose at an annual rate of 9.5%, four times the average productivity rate of the last 25 years. In short, companies continue to produce more with less, translating into the steepest drop in unit labor costs, the primary source of inflation, since 1945. Strong productivity and declining labor costs will continue to put downward pressure on inflation, which buys the Fed valuable time to continue its stimulative monetary policy. As long as inflation remains under control, our economy will continue to recover, and growth over time can cure a lot of economic ills.

Meanwhile, the stock market rally has resumed after an October pause. This impressive advance has occurred despite a stubbornly high level of skepticism as measured by weak consumer and investor confidence. Point being that there remains significant potential buying power should cash on the sidelines return to the market.

Along these lines, corporations hold more cash as a percentage of assets than at any point in the last 40 years. In fact, the total amount of cash held by the 500 largest non-financial firms is approximately $1 trillion. This fiscal conservatism reflects the once in a generation financial meltdown we have all lived through.

Eventually, corporations will begin to reinvest productivity-derived profitability and ultimately start creating new jobs. Unfortunately, the timing of this eventuality is difficult to predict.

Meanwhile, banks remain reluctant to lend preferring to build capital, a warning sign perhaps, that future loan losses may once again disappoint investors. Another ominous statistic is the unemployment rate which continues to worsen, topping 10% in the most recent survey, the highest level since 1983. Economists are fearful that unemployment won't peak until some time next year.

Not surprisingly, consumers are also continuing along the deleveraging path, as measured by weak retail sales. The all-important holiday shopping season is approaching, but we would be very surprised to see robust consumer spending for the remainder of the year.

Fearful of the next shoe... With weak employment, reluctant lending, and a traumatized consumer it seems logical that there would be a high level of distrust in the equity market rally.

Which leads me to a whole host of questions...

When will corporations start to invest cash and will they do it wisely or foolishly? When will consumers start to spend and what will they spend it on? Can small business, long the life blood of new job creation, manage to recover and grow without the support of small business lending?

I suspect we are entering a period during which the gap between winners and losers will be more pronounced than it has been in decades. Companies, large and small, are fighting for their very survival, but those that persevere will emerge stronger than ever. My sense is the market will narrow over the next few years, making stock selection increasingly important to achieving above average portfolio returns. Going forward, merger & acquisition activity could be a central theme in 2010 as corporations look for opportunities to deploy their mountain of cash.

Thus, it is clutch time for corporate America. CEO's have to regain the market's trust. The only way to do that is to perform in the spotlight, to succeed despite all challenges and potential reasons to fail. The best corporate leaders get this. The very best will rise to the occasion. And that is about as good as it gets.