Market-Driven Optimism

There’s a lot of talk right now about big government saving America, either from a second Great Depression (according to economist Paul Krugman) or from a health-care meltdown (according to President Obama). Well, I don’t think big government saves us from anything. At the end of the day, it is economic freedom, market competition, and free enterprise that remain the great engines of American growth.

The greatest source of stimulus for both the new bull market and the new economic recovery is profits. I’ve said it before, and I’ll say it again: Profits are the mother’s milk of stocks, business, and the economy. And if the positive-profits story continues its steady march higher, as I believe it will, investors are going to be just fine with stocks. And American consumers and workers are going to be just fine with economic recovery.

Of course, the Fed has played a big role in cushioning the banking system. I applaud that. But ultimately the self-correcting actions of American businesses and families are what always drive this economy, as long as we permit them to drive it.

Now, I’m not an optimist because we are spending and borrowing trillions of dollars. I’m not even an optimist because the Fed has front-loaded so much new cash into the financial system. I’m an optimist because — right now — we remain a market-driven economy. And if we protect that precious mission, and allow these great engines of growth and prosperity to do what they do best, then we will be just fine.