WASHINGTON -- Last May, when oil was $74 a barrel, gasoline was $3 a gallon and up, and the Dow had just plunged 214 points, I said the Dow would hit 12,000 before the end of the year.
"Look for the total economy to grow to $13 trillion by next year and for the Dow to surpass 12,000 by year's end," I reported, adding an admonition from legendary financier J. P. Morgan that "anyone who bets against the American economy will lose."
That no doubt sounded wildly pollyanish to some people at the time, and I got a lot of ribbing from colleagues and friends, but it was based on the fundamentals I saw in the United States and global economy at the time.
The stock markets were mindlessly in the grip of fears at a time when, to paraphrase FDR, the only thing we had to fear was fear itself.
The Fed was raising interest rates in a myopic obsession with inflation whose core rate, minus energy, remained relatively tame. But the new Fed chairman, Ben Bernanke, was sending signals the Fed would pause, which it did, and there were other signs, too, of continued economic expansion.
The Republican-run Congress was extending the 2003 capital gains and dividend tax cuts that President Bush quickly signed. Oil was showing signs of declining and, I believed at the time, gas prices would fall too. All this promised to further fuel the financial markets once Wall Street got over its bearish jitters, which it eventually did when it was clear that the sky was not falling.
At the same time, I saw a resurgent long term global economy boosting U.S. exports, continued growth in new jobs, higher corporate profits and renewed interest from investors looking to climb aboard while there was still time to grab some inexpensive stocks. The economy was growing by better than 4 percent and I saw no events on the horizon that were going to short-circuit that trend.
So here we are (as of last Thursday) approaching November and the 2006 congressional elections with the Dow surpassing 12,000 and the rest of the broader markets -- as well as the global markets -- rising along with it.
The questions that need to be answered now are twofold: Will the bull market and rising stock values influence the voters' anti-Republican mood over the next two weeks -- enough to blunt expected Democratic gains -- and will this economy keep growing as it has under Bush's pro-growth tax cut policies?
It is one of the ironies of the 2006 elections that the electorate remains in a gloomy mood about the economy. Rarely can one find an election in the past where voters wanted to throw out the party in power with the unemployment rate nearing a low 4.5 percent, the economy growing by better than 3 percent, and worker retirement stock portfolios rising by near double-digit percentages.
That mood may be changing. The Gallup Poll last week said "Americans' basic assessment of the national economy continues to be more negative than positive" though "that appraisal turned a bit brighter in the past month."
Gallup's latest scorecard showed 41 percent of Americans rating the economy as excellent or good, 42 percent said "only fair" and 16 percent said poor. That survey, conducted Oct. 9-12, does not reflect the market's latest ascent on Mount Twelve Thousand.
But other measurements like the consumer confidence surveys show a significant rise among Americans who are more confident about the U.S. economy, both now and in the future.
Let's not forget another voting bloc in the electorate: the fast-growing investor class and especially workers investing in 401(k) stock pension plans. Americans who now own stock -- 63 percent of the adult population -- cut across all the political lines, and for those who say the economy is a paramount issue in how they'll vote, their portfolios will no doubt make them feel better about the country's direction.
At the same time, I have no doubt that Iraq and the U.S. casualties there could and very likely will trump the economy's performance among voters for whom the war is the pivotal issue in this election.
Meantime, there is also no doubt in my mind that the Bush economy is going to continue to outperform the pessimists who are always seeing an economic collapse in the next quarter.
The burgeoning investor class will be a big part of this future growth -- especially the new workers who will be automatically enrolled in company 401(k) stock purchase plans as a result of the pension reforms passed this year by the same Congress that voters say they hate.
The global free market, free trade economy is on a roll, including many once-economic-backwaters in Eastern Europe and Asia, and American businesses like Wal-Mart, Boeing, Google and GM and their workers are going to benefit from that growth.
That's why Gallup reports that 54 percent of Americans now say this is a good time to invest in the stock market. Go USA!