The Republican victory in November may prove to be very positive for the economy and for stocks. Over the long term, the new GOP leadership seeks to reduce tax rates and actually balance the budget. If they are even partially successful, it will be a boon to the economy and markets. Even without the Contract, things look pretty good. Concerns about inflation are themselves inflated.
Global competition is a very real economic force working to keep rates down.
Domestic capacity utilization rates are trending upwards, but in an era when companies can shift production around the world to meet changing customer demands and available capacity, such traditional inflationary indicators have become anachronistic. New developing economies continue to bring on productive capacity at lower costs. Furthermore, productivity continues to improve, particularly in the service sector. Finally, the Federal Reserve has been responding to inflationary concerns. They have been aggressive at raising short-term rates in their attempt to slow economic growth.