The year 2011 is officially open for business, and for the first time in a long time, it seems the coming year might qualify as “normal.” Not awesome or hunky-dory, but at least recognizably ordinary.
Though there will be politics aplenty, there is no national election this fall. The Iowa caucuses are 12 months away. This ought to give us at least six good months before speculation, pontification and general silliness get out of control. Even then, the silliness will be confined mostly to Republicans. For better or worse, Democrats already know who will be at the top of their ticket in 2012.
There is no financial crisis and there is no more recession. Major companies are earning solid profits and are sitting on mountains of cash. We need not worry about a wave of bank failures or corporate bankruptcies. While there are many people without jobs, the period of mass layoffs is well behind us. Consumers who still have jobs are gaining confidence that they will keep them. This helped boost spending during the just-ended holiday season, and it should keep the economy moving forward.
Our latest episode of single-party government also is behind us. With 61 shiny new Republican members of the House of Representatives arriving on Capitol Hill this week, our polarized parties must choose between compromise and stalemate. That’s critical, because nowadays, neither party has much of a political center. There are no liberal Republicans anymore, and precious few conservative Democrats. As a result, one-party dominance has tended to produce unhealthy policy extremes. The GOP takeover in the House means nothing much can get done unless people on both sides of the partisan divide agree to do it. That does not guarantee good legislation, but it is better than what we had for the past two years.
Not coincidentally — at least in my opinion — the November election results were promptly followed by a “Santa Claus rally” that took the U.S. stock market, and many overseas markets, back to levels last seen before the collapse of Lehman Brothers in September 2008. The Standard & Poor’s 500 index closed the year just below 1,258. This is within the range I predicted in this space a year ago (I suggested it would be 1,320 plus or minus 100 points) and meets my personal definition of “normal” for the market during the past decade, which is between 1,200 and 1,500. We have not previously seen the index complete a month within this range since the Lehman collapse.
Though we are still well below the index peak of 1,565 from late 2007, we have come a long way back from the sub-700 low that we hit at the depth of the panic early in 2009. The stock market, of course, is normally volatile. But this kind of whipsaw in just a few years is not normal. In the past, we saw it only when the market had reached unsustainable extremes, such as the bubble peaks in 1929 and 2000. This time, the crash did not result from excessively high stock prices compared to corporate earnings; it came because the financial system was within a whisker of completely breaking down. With the breakdown apparently averted, stock prices and the economy are reverting to normal.
I think this will most likely continue through 2011. So, while once again cautioning you not to put any credence in my predictions (or anyone else’s) about short-term market moves, I will yet again go out on a limb to predict that the S&P 500 will close this year at 1,420, plus or minus 100. That would make this a pretty normal year.
The political war against business and business people is, if not over, at least in a state of truce. We are not going to see any congressional kangaroo courts this year in which executives are blasted for using corporate aircraft or, in the case of Goldman Sachs, managing not to go broke when others in their industry did. Republicans are not naturally inclined toward all this business-bashing, while Democrats, having belatedly discovered that you can’t have employment without employers (or political donations without donors), are suddenly eager to make nice. That’s a little more normal than we have recently seen.
The unemployment rate, hovering just below 10 percent, is still a long way from normal. If it does not drop below 9 percent by the end of this year, Barack Obama is almost certain to be a one-term president, and five Democratic senators who took seats from Republicans in 2006 will most likely be in jeopardy. The seats of those five — my old friend Jon Tester of Montana, along with Claire McCaskill in Missouri, Sherrod Brown of Ohio, Bob Casey of Pennsylvania and Jim Webb of Virginia — would be more than enough to give the Senate to the Republicans in 2013. So, after years of being used as punching bags, chief executives will be handled with kid gloves in Washington in 2011. The abrupt reversal may not be normal, but, I’m sorry to say, the two-facedness of politicians certainly is.
Not everything normal is good. The war in Afghanistan will grind on. Having promised to begin reducing American involvement in mid-2011, President Obama will no doubt entertain us by trying to satisfy members of his party who want a quick pullout while he reluctantly acknowledges the reality that our troops cannot leave without risking further disaster. I believe the president, whose pledge to close the detention camp at Guantanamo Bay has gone unfulfilled for a year, will ultimately bow to reality and keep troops in Afghanistan longer than many in his party would like.
After all, Sept. 11, 2011, will mark the 10th anniversary of the worst day of our lives — a day whose sorrow was plotted and directed from Afghanistan. A memorial to that day’s events will open at the World Trade Center site in Manhattan. This will help remind all of us, as though we needed reminding, that today’s “normal” means countering those who would commit mass murder against random strangers.
A normal world is far from a perfect world. Our era is neither the best nor the worst of times; it is merely our time. Sometimes it is not an easy time, as the last several years have shown. But the worst times eventually pass. For now, it seems the worst of the recent times has passed, and we can look forward to something a little more normal. And, usually, normal is pretty good for most of us.
My colleagues and I wish all of you a happy, healthy and prosperous year in 2011, and many more to follow.