Year End 2014

Stock Market
     December is always (with very few exceptions) a good month for the stock market.  Next month might not be as good (but you never know).  The Federal Reserve intends to keep interest rates low.  That means investors will continue to have an incentive to keep their money in stocks rather than in interest bearing accounts, for the simple reason that the dividend yield on stocks is much higher than the (practically non-existent) interest yields.
The Economy
     Rising stocks usually go together with a growing economy.  There are exceptions to that, too, but that is the usual rule of thumb.
     Low interest rates tend to boost the economy.  Business and consumer loans are cheaper, saving money for everyone.  The down side is that retired people who hoped to live on interest income are getting practically nothing.
     The fall in oil prices also saves money for consumers and businesses.  The result should be more disposable income, which should lead to more growth.
     Europe is once again a drag on the international economy.  Growth rates there are hovering around zero.  China's growth has slowed from its former double-digit pace.  Russia's economy is on the brink of a free-fall, because it depends so much on selling oil at high prices.
     The fact that the Federal Reserve is still keeping rates so low indicates that they are still concerned that our economy could relapse into recession.  One wonders what their approach will be if the fall in oil prices leads to falling prices in the economy in general.  They believe that falling prices indicate economic weakness.  However, it is possible for the supply of commodities to rise, and manufacturing efficiency to increase, even in a growing economy, leading to declining prices. Still it is true that there is plenty of economic weakness in the world.
     The continuing large Federal budget deficits and the spiraling national debt are causes for concern.  Most of us have been putting off thinking about them till later on down the line.  However, at some point the US economy will have to stand on its own and stop relying on deficit spending and interest rate subsidies.  The fact that those things are still going on indicates that the economic disruptions of the previous decade are not actually over yet, despite the growing economy.  The crisis will not really be over till the Fed's interest rate policies are back to normal and budget deficits are at least back to pre-crisis levels.
     Two things need to happen for that to occur:  (1) economic growth, and (2) the will to cut the deficit.
     Economic growth is occurring, but it is not strong, and it suffers from various drags and hinderences, many of which arise from policies of the current administration in Washington.  Of primary concern is the torrent of new red tape spewing out of various bureaucracies.  Included in the regulatory orgy are attempts to regulate carbon emissions and assaults on traditional sources of energy, especially coal and oil, which are basically regarded as evil.  We certainly want to find cleaner ways to fuel our economy, but probably cold-turkey is not the best way to do it.
     Tax policies, also, could be better, to say the least.
     There is a definite anti-business bias in the policies of the current administration.  Sometimes the administration seems to show signs of recognizing some economic realities, but its political base goes crazy every time that happens.
     In regard to cutting the deficit, that is a deep-seated problem.  It currently seems to be divided along party lines, but we have only to look back to the Bush administration, during which there were times when Republicans controlled both Congress and the White House, to see that the pressures to overspend are very pervasive.  However, we can hope that if the party that currently talks loudly about cutting the budget gets the power to do so, things will at least get a little better in that area.
     All-in-all, there is hope but continued need of caution.