The start of a new year is globally a time of celebration.   It is a new beginning with a universal theme of optimism.  But how many of us in the past 10-15 years have genuinely felt a sense of anticipation as a New Year began?   This year we can and should feel that way.  The long-term average Gross Domestic Product (GDP) for the United States has been 3.4% since 1800.  For the past 10-15 years the “new normal” has been 2% because we have been in the trough of a downswing in the long wave.  I will be amazed if it is not north of 4% in 2018!

 The reason is four-fold.   Firstly, no one expects it and I am a contrarian.  Secondly, I believe the upswing in the long wave has started.  Thirdly, last month’s tax cut program was additional fuel for the    upswing.   And lastly, the stock market is a discounting mechanism.  It has been higher for nine years.  And during that time, it has been the most joyless bull market ever.  Also, the most feared.

The vote on the tax cut – 52 Republicans 48 Democrats – was an unneeded affirmation of the divisiveness that has characterized the country for the past 10-15 years.   Our society has been trapped in a social and economic malaise.   We have not been this divided as a society in my lifetime.  The cause has been a transition that has changed us from an industrial to a knowledge/service based economy.   The process created a greater divergence between the haves and have-nots.   

One of my sons’ recently texted me asking if I believed in Ronald Regan’s trickledown theory.  The question was asked because of the “unfair” tax bill just passed.  “It favors the 1%” was his take.  My initial response was, “How many of us are hired by poor people?” Then I asked him how many people he thought were hired by Phil Knight (NIKE), Michael Dell (Dell Computer), Bill Gates (Microsoft), Steve Jobs (Apple Computer), David Overton (The Cheesecake Factory), and Howard Schultz (Starbucks)?  Answer:  just six people created well over a million new jobs.  I received a reply thanking me for my “insightful answer.”  It wasn’t insightful on my part.   It was from the experience of seeing it unfold for years.

 For the past 10-15 years we have been in an economic trough reflecting two concomitant transitions.  The first is the continuing change from an industrial to a knowledge economy; the second from the trough of the long wave to the beginning of an upswing.  The upswing is always created by new technology that was driven by the previous downswing.   It is our need to survive that creates it.  Today, we have Google, Facebook, Tesla, Netflix, Apple (iphone), Uber, Airbnb and Amazon to name just a few of the big ones.   All are entrepreneurially run and – other than Amazon – not one existed 15 years ago.

The public fear of the stock market reminds me of a lecture in biochemistry I had audited years ago.  It was given by Dr. David Dressler.  As an aside in his lecture, he brought up the subject of scientific breakthroughs saying, “They go through three stages.  In the beginning a breakthrough is ridiculed.  Then as time goes by, it is accepted.  Lastly, the breakthrough is accepted as patently obvious.”  We are in the first stage of a new beginning that is ridiculed daily … and years from being accepted.   

Francis Patrick Boland