January 4, 4:30 pm EST

Global markets have started the year behaving very well, supporting my view that we’re in the early innings of an economic boom, and we should get another big year for global stock markets.

But, as we discussed heading into the end of 2017, that view isn’t shared by Wall Street or the Fed.  For 2018, the Fed is looking for just 2.5% growth.  And Wall Street is looking for just 6% growth in stocks (according to this WSJ piece).  That’s less than the long term average return on the S&P 500.

Both continue to, somehow, ignore (or underestimate) the influence of fiscal stimulus, which is hitting into an already fundamentally improving economy.

Wall Street was looking for 3% growth in stocks last year.  We got almost 20% (better in the Dow).  And the Fed was looking for 2.1% growth last year. It will be closer to 3% for full year 2017.

They thought Trump couldn’t get policies legislated.  Now we have big tax cuts, meaningful deregulation, the beginnings of a government spending program (started by natural disaster aid), and a massive incentive for companies to repatriate trillions of dollars.

If we add that to an economy with near record low unemployment, cheap gas, near record low mortgage rates, record high consumer credit worthiness, record high household net worth, a record high stock market and near record low inflation, it’s hard to imagine the economy can’t do better than the long term average (3% growth) this year.

As we’ve discussed, we’ve yet to experience the explosive bounce in economic growth that is typical of post-recession environments.  This is set up to be that kind of year —  maybe something north of 4%, which should finally move the needle on inflation.  If that’s the case, despite the quadrupling of the stock market from the 2009 bottom, money may just be in the early stages of moving out of bonds and cash, and back into stocks.

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