One popular explanation is that there is a glut of capital in the world in search of a home, and a lot of it finds its way into relatively risk-free assets, such as Treasury bonds.
We were prepared for a more difficult ride than we wound up with. An S&P 500 of 3 percent is not terrific, but it's not a bad year.
My expectation is the general trend of the next few quarters is for profit growth rates to come down, and it will start by having companies send out that message.
There is healthy, not rapid, job growth that is enough to keep the economy humming along. That strong labor market has potentially inflationary pressures. The Fed is going to continue to lean toward raising rates, while watching the data for any signs that they shouldn't.
Right now bonds are reacting, and perhaps overreacting, to employment and CPI. What we will probably see in the next couple of months is that we aren't as close to an interest-rate hike as those two reports might suggest.
That's not what we expected to see in a year when earnings growth would slow slightly, and we were seeing some of that slowing already.
As a forecasting rule of thumb, the yield curve has been pretty good but it may not be a good rule of thumb today.
If the targets continue to be specific industries such as financial firms and airlines, it's not clear that another terror attack will have strong ripple effects through the rest of the economy.
We got off to such a raging start this year, it was hard to believe it was sustainable. There was very little that warranted the huge run-up in prices coming out of the gate.
Stocks remain richly valued as a multiple of earnings. If earnings do not accurately represent the fortunes of Corporate America, then stock prices may be even more expensive than the statistics suggest.
