The free-market American economy, relatively unburdened by excess taxes and regulations, with monetary stability lately restored and new free-trade initiatives on the horizon, has come through a tough period with poise and purpose. The long prosperity wave that began after World War II is set to cycle upward, following another of the periodic interruptions that characterize market capitalism and gales of creative destruction.
There are always what-ifs. Will the Fed provide sufficient liquidity? Will lower tax rates work as well for George W. Bush as they did for JFK and Ronald Reagan (and Bill Clinton in his second term)? Will terrorism strike again at home? Will energy flow freely at moderate prices?
But at the end of the day, good forecasting, like good policymaking, requires a vision. Mine is a simple one. President Bush is, in fact, the son of Reagan. His supply-side economic policies will produce strong growth. His homeland-defense policies will secure our domestic safety. His vision of spreading freedom and peace abroad, especially in the troubled Arab lands, will ultimately play out as successfully as Reagan's goal to end Soviet and East European communism.
In the spirit of fearless forecasting, I predict 4 percent real economic growth in 2004 and 2005, with double-digit corporate-profit gains for each year and only mild interest-rate increases. Stock markets will rise nearly 50 percent from current levels, and by the end of 2005 the market averages will be back to the prior peaks registered in early 2000.
A few days ago, legendary investor and the Vanguard Group inventor of indexed stock funds John Bogle told me that buying and holding broad stock-market averages is the best way to create wealth in the long run. Not trading aggressively on numerous little things, like philosopher Isaiah Berlin's fox, but keeping to one large vision, like his proverbial hedgehog.
When asked if his long-run view simply represented confidence in American business, Bogle said, "That's exactly the right phraseology."