The Triumph Of The New Economy

It was a good year to be an optimist. In 1996, defying the warnings from skeptics, investors big and small shoveled money into the U.S. stock market, which hit record after record. Over the past year, despite the recent correction, the Standard & Poor's 500-stock index has returned 20%, plumping up many a brokerage account and retirement portfolio. Since the beginning of 1995, the market has gained an astounding 65%.

Is the market crazy? Hardly. Underlying the equity boom is the emergence of a New Economy, built on the foundation of global markets and the Information Revolution. Starting in the early 1980s and accelerating in the past few years, the U.S. economy has been undergoing a fundamental restructuring. Exports and imports, once relatively insignificant, now amount to 26% of gross domestic product. Business investment in computers and communications hardware has soared by 24% over the past year alone, accounting for almost one-third of economic growth. From the Internet to direct-broadcast television, new companies are springing up almost overnight to take advantage of cutting-edge technologies.