Well, we can now say with confidence that it was a good year for both the stock market and US economy. Not great, but good.
That means we can also say that the bears were wrong.
And that’s saying something. Because coming into this year, pretty much everyone (including me) was convinced the US was headed for hell in a handbasket.
Of course, what most bears will tell you is that they weren’t wrong–they were just early. All the horrible things the bears were predicting, the bears will say, are still going to happen. Bernanke is still printing “worthless pieces of paper.” Hyper-inflation is just around the corner (or economy-destroying deflation). Unemployment will surge higher. The US will collapse under its frightening debt load. The US is still Japan–an empire in decline, in the midst of two or three “lost decades.” And the recent stock market revival is just a “sucker’s rally” in the midst of a long-term bear market. And so on.
And at least some of those arguments are compelling.
So will the bears finally be right in 2011?
That remains to be seen.
If I had to bet, I’d take the bearish view next year, at least with respect to the stock market. I find the “two-decade debt workout” argument compelling. The golden economy and bull markets of 1980-2007 were fuelled in large part by massive borrowing by both consumers and the government. The new forced “austerity,” I think, will lead to slower growth and weak asset performance. Houses and the stock market are, even now, expensive by historical measures. So I think the future is likely to bring more high unemployment and disappointing returns.
My colleague at Yahoo, Dan Gross, however, is more optimistic (see video below). Dan points out that there are important differences between the US and Japan. By bouncing back from the worst financial crisis since the Great Depression, the U.S. has, once again, demonstrated its resilience. And I certainly wouldn’t disagree with him on that.
In any event, 2010 was a good year for the bulls. And we can now say officially that the bears weren’t early. They were wrong.
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