Anytime you get a report that shows growth and goes against inflation, as in the productivity report we saw today, the market's going to react well to that.

It's as good as it gets. You've got low inflation, minimal wage pressure, great productivity, booming growth and strong demand.

Inflation is the wild card for 2006, with rising oil prices, an increase in commodity prices, slow productivity gains and rising interest rates.

Coming off such a low base, higher rates are confirmation we're in an economic growth cycle, as opposed to killing off the growth cycle, ... It doesn't deter my confidence in the stock market now.

If anything, this confirms the Fed's bias towards inflation rather than worrying about a slow down in growth. The Fed seems to have no worries about growth, as least as far as manufacturing is measured by ISM.

We expect the combination of solid economic growth and higher inflation risks to push the Fed to raise rates higher than is implied by prevailing bond yields.