US stocks had another impressive week with three of the four main indexes making all-time highs. The Dow closed +1.08% and the NASDAQ 100 regained its footing, closing +1.91 %.  Our risk gauges remain strongly bullish.

The news on Capitol Hill was good for stocks, as the proposed tax bill looks ripe for passage. Right now, the consensus among top forecasters is that stocks will continue to rise next year on decent earnings growth and remain puffed up for the foreseeable future.

One possible factor supporting the forecasts is that the new tax code will put more money in corporate bank accounts and most likely fuel stock buybacks, a big factor in this long running bull market.

In fact, mutual funds are showing equity outflows which is being offset by corporate buybacks and mergers. One amazing stat is that there are 50% less stocks publicly traded today, when compared to the late 1990’s. It is not hard to see why corrections are short lived and why the bull market has legs during self-reinforcing dynamics.

The moral compass of the country seems to have caught a bit of a break as well when the Senate race in Alabama elected a Democrat, the first in 25 years. That was despite the antics of Roy Moore charging the voting booth mounted on his horse. This was Moore’s version of Pickett’s charge, a gallant effort in the form of a visual metaphor, but ultimately ending in failure.

Markets also liked the rate hike by the Fed. It signaled to the markets that the central bank was confident enough of a surging economy and that the .25% hike was not enough to unhinge the markets. In fact, long bonds shrugged off the hike and rose. We would be a lot more cautious about the economy after several more hikes that are promised in 2018.

The other big themes are that copper was strong, while most other commodities remained near 100 years lows on a relative basis to equities.

Foreign equities and especially emerging markets have relinquished leadership to US equities. Big caps and value stocks had a nice pop off the lows and it remains to be seen if they can make up that lost ground by breaking out of resistance levels established over the last 6 months.

On a final note, there is a currency setting up with strong compression that we cover in our premium video. It has important ramifications for the global economy