Capitol crunch
Social Security and tax reform are on Bush's investor-friendly agenda
Checking inflation. Yardeni rests his forecast on a macro thesis that the unraveling of the Soviet Union and China's integration into the world economy have created increased global competition, which should keep worldwide inflation in check for years to come. He's also confident about his inflation outlook based on what happened in 2004. Even though oil prices soared from $34 at the start of the year to just over $55 and the dollar slid more than 8 percent on a trade-weighted basis--raising prices on imported goods--inflation remained tame.
Even so, Wall Street hates uncertainty, and this year could produce the kind that market mavens always have trouble figuring out--political. Give the market an earnings surprise and stocks immediately correct, sometimes too much--in which case value players step in to maintain equilibrium. But Wall Street has always had a hard time fathoming Washington. So if politics dominates the headlines again in 2005, the market could well do what it did for much of 2004: trade back and forth but barely budge until the uncertainty is resolved one way or another.
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