The Daily Prophet: This Rally in Stocks Has to End, Right?

Maybe it's time to start believing in the stock market. The Dow Jones Industrial Average is now up 15 percent since the U.S. election, rising above 20,000 in late January for the first time and blowing through 21,000 today in its biggest gain of the year. The S&P 500, Nasdaq Composite Index and Russell 2000 also closed at record highs.

Cynics say this is built on little more than hope that the Trump administration can deliver on its plan to cut taxes, reduce regulations and spend big on infrastructure. Sure, some of that is built into prices, but there's no denying that global fundamentals are strengthening. U.S. manufacturing expanded in February at the fastest pace since August 2014. Euro-area manufacturing accelerated for a sixth month. An index tracking Chinese manufacturing held at some of its highest levels since 2012. While the U.S. gets the headlines, the rally is a worldwide phenomenon. An MSCI index of stocks that excludes U.S. equities is up 9.30 percent since late November.

At almost eight years, the current bull market in U.S. stocks is the second-longest on record, but they don't die of old age. It often takes a recession, and not one of the more than 80 economists surveyed by Bloomberg News sees that happening this year or next. "We are now into what we would all agree is implementation risk -- what can Congress and Trump get done and how long does that take and what is the sequencing of those events?'' Neil Dwane, a global strategist at Allianz Global Investors, said Wednesday in an interview on Bloomberg Television.

JUNK BONDS
It's not just stocks. A key area of the debt market is also flashing an up arrow when it comes to the outlook for the U.S. and global economy. In fact, the best performing bonds this year are those rated below investment grade, or junk. The securities have gained 3.12 percent this year through yesterday, according to the Bloomberg Barclays Global High Yield Index. Investors are accepting yields that are less than 4 percentage points above Treasuries to buy the debt, versus almost 9 percentage points a year ago. Corporate profits are rising after years of being depressed. With the earnings season drawing to a close, about three-quarters of S&P 500 members that have reported results beat profit estimates and a little more than half exceeded sales forecasts, according to data compiled by Bloomberg.