The bull market is intact with the S&P 500 rising 2.5 percent in the second quarter. Technology stocks continued their leadership as reflected in the Nasdaq’s 3.9 percent gain. As strong as the domestic market has been international markets were better still, aided by a falling dollar. 

Most of the stock gains came in the first two months of the quarter.In June, roles reversed as the lagging areas (healthcare, financials, steel, etc.) led while the high-flying technology stocks retreated. Until the June reversal market participation was quite narrow. A handful of big-cap tech stocks (Apple, Facebook, Amazon among them) have dominated the market this year while most other issues are up or down just slightly.In fact, five technology issues account for 40 percent of the S&P's gain this year. If you don't own them, it's been a nice but hardly headline-worthy year.  

Another way to view the narrowness of the market rally is to examine how many stocks are near their highs versus their lows. On June 19, the day the media announced “Record Highs!” there were about as many stocks in the S&P 1500 index that were 20 percent or more off their highs as there  were those within 2 percent of their highs.

Does the market rally point toward an improving economy? Not so fast. Utilities are near their highs, Treasury yields are down, and the yield curve is flattening. That wouldn’t happen if growth expectations were high. A better explanation rides on the hope of a corporate tax cut. Tax cuts will increase profits, which will boost stock prices. If tax cuts are in jeopardy or even delayed more than expected, enthusiasm could and should wane. Even though Congress is having trouble with health care, tax cuts still appear likely.

Large company CEOs are more optimistic about the economy than investors, thanks in part to the prospect of those tax cuts. In a recent survey the CEOs were more optimistic about economic growth than they've been since 2014. They expect GDP growth of 2 percent in 2017 in part because whatever tax cuts come along later in the year won't have much effect until 2018. There are other reasons their GDP outlook is modest. The IMF has tempered expectations here as well. It expects GDP growth of 2.3 percent this year and 2.5 percent in 2018. Why so modest?

In the simplest terms, GDP growth is the sum of productivity gains and a growing labor force. For the last decade, productivity grew at one percent annually, about half the pace of prior decades. One reason is that we have increasingly become a service economy, and a productivity boost is harder to achieve than it is in manufacturing plants using more robots or at automated fast-food restaurants. The labor force is not even growing at one percent because so many Baby Boomers are retiring and the participation rate is at a low level last seen in the 1970s. Add it all up and GDP growth will grow at well below three percent, which used to be a low bar easily and often met or exceeded; now it's a high one last reached in 2006. So while politicians talk about increasing GDP growth to a sustainable three percent words alone won't do it, and the avenues to get from here to there are few.

What avenue would work? Corporate tax reform should encourage money held overseas to be brought back home to fund capital investment and other uses. New plants and better equipment must increase productivity to justify the investments and history shows they do. Given our low fertility rate, immigration must be the answer to population growth. Lucky for us so many people around the world would rather be here than there, wherever that is. None are lining up at the embassies of Venezuela, Cuba, Russia or China to apply for immigrant status and visas. No wonder.But we need to welcome them.

Where does this leave investors? One needn't be entirely in one camp (strong growth) or the other (slow growth), and we're not.Depending on your investment profile (growth versus stability) several of our holdings are closely tied to the economy and faster GDP growth (Nasdaq 100 ETF and Emerging Market ETF) while many are not (utilities, healthcare, telecoms). Then there are the income vehicles – preferreds and exchange-traded debt. They continue to provide the best risk-adjusted returns.

Whether the economy will turn strong or muddle along will become clear in time. In the meantime, profit growth will continue to exceed nominal GDP growth (4-5 percent).Interest rates will rise, though not by much.Such an environment bodes well for stock investors even after the market's long run. Bull markets don't die of old age. They die ahead of a recession, one caused by excesses we do not see today. In short, the bull market is not ending anytime soon.