January 4, 4:00 pm EST

We are off to what will be a very exciting year for markets and the economy.

Over the past two years I’ve written this daily piece, discussing the bigslow-moving themes that drive markets, the catalysts for change, and the probable outcomes.  When we step back from all of the day to day noise that has distracted many throughout the time period, the big themes have been clear, and the case for higher stocks has been very clear.  That continues to be the case as we head into the New Year.

As I’ve said, I think we’re in the early stages of an economic boom.  And I suspect this year, we will feel it — Main Street will feel it, for the first time in a long time.

And I suspect we’ll see a return of “animal spirits.”  This is what has been destroyed over the past decade, driven primarily by the fear of indebtedness (which is typical of a debt crisis) and mis-trust of the system.  All along the way, throughout the recovery period, and throughout a quadrupling of the stock market off of the bottom, people have continually been waiting for another shoe to drop.  The breaking of this emotional mindset has been tough.  But with the likelihood of material wage growth coming this year (through a hotter economy and tax cuts), we may finally get it.   And that gives way to a return of animal spirits, which haven’t been calibrated in all of the economic and stock market forecasts.

With this in mind, we should expect hotter demand and some hotter inflation this year (to finally indicate that the global economy has a pulse, that demand is hot enough to create some price pressures).  With that formula, it’s not surprising that commodities have been on the move, into the year-end and continuing today (as the New Year opens).  Oil is above $60.  The CRB (broad commodities index) is up 8% over the past two weeks – and a big technical breakout is nearing.

This is where the big opportunities lie in stocks for the New Year.  Remember, despite a very hot performance by the stock market last year, the energy sector finished DOWN on the year (-6%).  Commodity stocks remain deeply discounted, even before we add the influence of higher commodities prices and hotter global demand. With that, it’s not surprising that the best billionaire investors have been spending time building positions in those areas.

This year is set up to handsomely reward the best stock pickers.

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