Buoyed by currents of generally positive economic opinion, along with an increasing amount of speculation and greed, the stock market continues to test new highs. The underlying economy, the soundness of which the stock and bond markets are supposed to value, is in very good shape. Inflation and interest rates are in check and it is easy to see these conditions continuing well into the future. In fact, it is hard to see them changing for the worse. Areas of weakness include basic manufacturing and the consumer sector.
Inflation is almost a non-issue.
With excess manufacturing capacity both here and elsewhere in the world, and an ample supply of unemployed workers competing for jobs, it is hard to see the inflation picture changing dramatically. It is possible that while general manufacturing and labor capacity exist, specialized capacity and labor needed for technology-based industries could become scarce, and therefore inflationary. A new semiconductor fabrication plant, often referred to as a fab , costs well over a billion dollars to build. If demand for semiconductors continues to grow at current rates, new fabs will have to be built and overall pricing will have to increase. Unemployment numbers could also be misleading.