Major market indices were higher last week. The DJIA gained 1.28%, the S&P 500 rose 1.42%, and the Nasdaq climbed 1.70%. Growth stocks outperformed value stocks. And the small cap index climbed 2.78%. The 10-Treasury yield closed 1 basis point higher at 3.26%.

Stocks leapt upward as private companies added 200,000 jobs in March, M&A activity continued, and Japanese manufacturers began to come back on line. With the S&P 500 returning 5.4%, the quarter ending March 31st saw the stock market derive the best first-quarter performance since 1998.

Next week, companies will begin to announce their 1Q earnings, as well as their outlooks for the rest of 2011. And while the story of good growth, low inflation and an accommodative Fed remains intact, things appear to be getting trickier.

One troublesome aspect, more symptom than cause, is the lack of buying volume. This market appears to be melting upward on anemic volume. Traditionally, that has portended a correction. Bulls must figure out a way to convince the naysayers to climb on board, or this market will have to drop to a level capable of convincing the negative and neutral parties to join in.

Also symptomatic are revised GDP estimates by Goldman Sachs. Perhaps Goldman was acting a bit Pollyannaish with their initial 1Q forecast, but they've come down from 3.5% to 2.5%. More worrisome is their 4% 2Q forecast, and some of the developing headwinds which will force the firm to rethink those estimates, as well.

Inflation has begun to stir. Energy costs are swooning. Rents are heading up. Food stuffs have gotten pricier. While core inflation remains relatively tame, the average U.S. consumer does not focus on core inflation as she fills up her gas tank or shopping cart.

Fed officials are beginning to react to these firmer inflation readings. QE3, which would begin in June with the expiration of QE2, is likely a non-starter. Some firms are forecasting that rate hikes could come sooner than expected (Goldman continues to forecast 1Q 2013, but has recently intimated that hikes could begin sooner). Some Fed officials have expressed outright concern over an inflationary outbreak.

And with employment data firming up, and economic growth intact, many believe that QE3 is dead in the water. But, from a global perspective, the Bank of Japan's massive stimulus and intervention into the bond market may already be the equivalent of a QE3. Helpful, though less direct. Of course, the Fed will consider that as it ponders its next move.

While none of these issues are dramatic, and the storyline persists-solid growth, low inflation, friendly Fed-the situation in Japan, rising oil prices and sovereign debt issues certainly have raised the level of difficulty.

However, with all new challenges come opportunities.

When we look at the issues across the current macroeconomic landscape, we see one market place sitting in a position to benefit by most. Russia.

The Russian MICEX Index increased 22.5% in 2010, and is up 12% in 2011.

While much of the western world suffers from an anti-Russian mindset, one of the last vestiges of our cold war hangover, Russian outperformance in the current environment is driven by several concrete factors.

First, the Russian ruble has appreciated against the dollar. We enjoyed that in Europe for some time, adding the euro's appreciation to our equity and bond profits for years. One now receives the same benefit in Russia.

Second, Russia is safe from much of the political turmoil transpiring in other oil exporting nations. While the western media enjoys a good laugh at photos of Prime Minister Putin occasionally lifting weights in his form-fitting swimwear, Putin and President Medvedev have been flexing their political and economic clout around the world. And unlike the leaders of most western countries, Putin and Medvedev remain beloved at home.

Third, Russia is the largest exporter of oil and natural gas. For every $10 increase in the average annual oil pricel, Russian revenues rise by $20 billion, making it one of the few large economies in the world that actually benefits from rising energy prices. And as Russia is not an OPEC member, in can increase production when it wishes, taking advantage of elevated prices.

And finally, with the Japanese sucker punch delivered to the global nuclear energy consortium, much of the energy consumption, in Japan, Europe and elsewhere, will be rerouted to natural gas. Russia will be a beneficiary of that, short or long term.

With its aging population, poor infrastructure and other issues, many were, just recently, willing to write off the Russian Bear. Let's not be so quick to judge. This may turn out to be the story of the Russian Bull. Stay tuned...