The Dow, S&P 500, Nasdaq and Russell 2000 each reached new heights of all time on Monday.
Investors are stunned with excitement and they clearly believe that big multinationals from Big Blue and small businesses that do most of their business in the United States will continue to thrive.
So, is it Donald Trump's rally? Or Janet Yellen's rally?
Some strategists believe that Trump's recovery plans and talk about killing many heavy regulations are the reasons why the actions soar.
Or maybe this is better characterized as a continuation of the Rally of Barack Obama?
You might say that Potus 44 treated Potus 45 a fairly good hand.
The solid labor market and the global economy inherited may have been the reason why consumers and businesses are so confident.
But investors (and financial journalists) are often quick to grant more credit to the president – and to blame – than they deserve for the execution of the stock market.
The RBC strategist, Jonathan Golub underlined this in a report on Monday, which was well entitled “Message on the market: it is not Donald”.
Related: Trump does not kill the bull market
Golub noted that the S&P 500 had increased by almost 7% from the end of June to the day of the ballot – an era when most of the polls predicted that Hillary Clinton would be the next president.
But the actions have continued to rally since then, increasing still 8% since Trump succeeded in the upset victory (at least towards the consumer media and Wall Street).
You cannot have it in both directions. It is not logical to suggest that actions have rallied because investors thought that Trump would lose and that they continued to rally because Trump has not lost.
Bond yields have also increased since Trump won, a phenomenon that many investors have attributed to the probability of revival of the President and the Republican Congress.
However, Golub stresses that the yield on the 10 -year -old American treasury also increased at the end of the summer.
Of course, many investors also expected Clinton reminders.
However, once again, many investors claim that Trump is the catalyst for something that was not only happened before being elected, but that he happened because many thought he would lose.
Related: Actions avoided a dive of 1% for an unusually long period
It is therefore strange that Trump is quoted as the main reason for a market rally that started months before anyone who thought he could win.
What is really going on? The only constant in recent months is the federal reserve.
Yes. The markets react to Washington. But they pay more attention to Janet Yellen, not in the White House.
The Fed made the crystal clear before the elections it would probably increase interest rates in December and would sometimes do it in 2017, it doesn't matter who won the presidency race.
The good news for investors is that the American economy seems to increase regularly, but does not seem to risk overheating.
Related: this is why the largest money manager in the world is worried
The most recent job report has shown that wages have increased at a decent rate of 2.5% per year. But it is not high enough to arouse the fears of inflation on the run and lead the Fed to aggressively increase the rates.
Even if Yellen and the Fed hike are prisoner three times this year, they are likely to do it a quarter of a point each time. This would push the short -term Fed rate rate to a fork of 1.25% to 1.5%.
It is still extremely low. At these levels, the shares would always be more attractive than obligations. Business benefits should be able to continue to increase with a healthy clip. And consumers would likely continue to spend.
Investors would therefore be wise to keep an attentive eye on Yellen and not just to focus myopic on the president,
In this spirit, Yellen should testify before the congress on Tuesday and Wednesday. And what she says about the moment and the magnitude of future rate increases could eventually keep the rally with a steam – or stop it dead in its footsteps.
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