U.S. stocks rose to record highs even as the political situation in Washington remained somewhat chaotic. National Security Advisor Michael Flynn resigned Monday after reports that he discussed sanctions against Russia with Russia’s ambassador and misled Vice President Mike Pence. His expected replacement, Robert Harward, declined the offer. In M&A news, two mega-deals in the health insurance industry were terminated, as had been expected for some time. On Friday, Kraft-Heinz offered to buy Unilever for $143 billion.

Weekly Returns:
S&P 500: 2,351 (+1.5%)
FTSE All-World ex-US: (+0.7%)
US 10 Year Treasury Yield: 2.41% (+0.01%)
Gold: $1,235 (+0.1%)
USD/EUR: $1.062 (-0.2%)

Major Events:

• Monday – Allergan agreed to pay $2.5 billion for Zeltiq Aesthetics, makers of the CoolSculpting System which uses cooling to kill fat cells
• Tuesday – Health insurers Aetna and Humana agreed not to fight an antitrust decision to block their $34 billion merger
• Wednesday – Health insurer Cigna announced it was calling off its $48 billion deal with Anthem and is seeking $13 billion in damages in addition to a breakup fee
• Thursday – U.S. retail sales were up 5.6% compared with a year ago, more than expected. Meanwhile, consumer inflation rose 2.5%, the most since 2012
• Thursday – Annual inflation across 35 developed economies rose 1.8%, the most in about two years and close to the target for many countries of around 2%
• Thursday – Ford announced it would invest almost $1 billion in a startup aimed at creating self-driving cars
• Thursday – Snap Inc. lowered the expected range for its much anticipated IPO, now valuing the company in $19-$22 billion range
• Friday – Kraft-Heinz made a $143 billion offer for Unilever, which was initially rejected

Our take:
The bull marches on. Wednesday marked the fifth consecutive day of record highs for the S&P 500, Dow and NASDAQ. It is the first time that has happened in 25 years. Tech stocks are leading the way and it is not hard to draw similarities between now and 1999.

One big difference from our perspective, however, is a lack of greed on the part of investors. In 1999, retail investors couldn’t get enough of tech stocks and they felt entitled to 20+% gains every year. Today, tech darlings still rank among investor favorites, but other sectors are not entirely ignored. Meanwhile, most investors seemed pleasantly surprised with high single-digit gains last year and the strong start this year.

We don’t see much fear, greed or even complacency. It is more like confusion. Dramatic losses in 2008 shook out much of the overconfidence in many investors. More recently, the surprise Brexit and the U.S. election drove home the fact that the world is unpredictable. So it seems the consensus approach is to wait and see. In our view, that is neither bullish nor bearish. At the individual level, as long as investors are purposeful in maintaining an appropriate diversified asset allocation, it is probably just fine.