2003 in Stocks: Four in a Row for the Bears

Domestic politics will also be a negative. Expect an Iran-Contra type scandal stemming from abuses by members of the bellicose faction within the White House. Hawks like Defense Secretary Donald Rumsfeld are playing fast and loose and will make a big mistake soon, which his Pentagon foes will duly leak. While a scandal may hurt Bush's chances in 2004, his enactment of sizable tax cuts and a quick victory in Iraq should mean strong approval ratings through 2003, pleasing the market.

Foreigners, however, will not like to see the government's budget deficit swell. This will be another source of dollar weakness. The Fed will have to hike rates more quickly than it would like to prevent an exodus of foreign money.

Happy New Year.