We are only a few days into the New Year and already we need a recap of the major developments. Democrats and Republicans exhibited the smallest amount of cooperation possible, and they passed a law that averted the fiscal cliff--but just barely. Sadly, they did not come close to solving the problem that caused them to create the fiscal cliff in the first place, namely our unfathomable federal budget deficit. Nor did they do anything to simplify the burdensome tax code. The law they did pass only accounts for a tiny percentage of the deficit, and the immediate response of the stock market was a huge rally. It makes me wonder what the response would have been if Congress had passed a more substantial bill.
But maybe that is the point. Maybe we have finally arrived at the point where the less Congress actually tries to do, the better. So my New Year's resolution is to stop worrying so much about what the politicians are doing in Washington, and start focusing more on the country’s economic fundamentals. The economic news during the past few months has actually been pretty good, and it has become increasingly clear that the biggest impediment to a more rapid economic recovery is the distracting sideshow in our nation's capital.
Out here in the real world, interest rates remain low yet there are no signs of inflation. Energy prices are gradually coming down, while home prices are starting to accelerate upward. The auto sector is in the middle of a very strong recovery. It is true that growth rates in many segments of the manufacturing sector have been stagnant for the past few months, but the future expectations of most manufacturers remain optimistic. The prevailing sentiment is that the economy is steadily getting better, and it will continue to do so for the foreseeable future.
So while the drama and intrigue emanating out of Washington DC has kept us all entertained for most of the past year, I am not here to be a political pundit. I much prefer analyzing and forecasting market dynamics that are based on the laws of supply and demand. Global demand continues to expand, and the opportunities for U.S. manufacturers to supply this demand are vast. So for 2013 my plan is to spend more time looking for ways to make money and less time fretting about the ineptitude of politicians.