Since the election, markets have accelerated the pace of the advance as shown in the chart below.

The advance has had two main story lines to support the bullish narrative.

  • It’s an earnings recovery story, and;
  • It’s all about tax cuts.

There is much to debate about the earnings recovery story but as I showed previously, and to steal a line from my friend Doug Kass, this “new meme increasingly resembles ‘Group Stink.’” To wit:

“Despite many who are suggesting this has been a ‘rational rise’ due to strong earnings growth, that is simply not the case as shown below. (I only use ‘reported earnings’ which includes all the ‘bad stuff.’ Any analysis using “operating earnings” is misleading.)”