Markets tapped all-time highs last week. What pushed it: Corporate earnings, NAFTA negotiations, or Senate action on tax reform?

Corporate earnings have been favorable, which extended the market gains early in the week. 80% of S&P 500 companies reporting (17%) have exceeded earnings expectations; this is a very optimistic start to the earnings season.

As we moved into mid-week, a standstill in NAFTA negotiations slowed progress. It appears NAFTA talks will extend into 2018. All parties were trying to avoid this as we would be approaching the presidential election in Mexico and mid-term elections in the US. The elections will just further complicate any NAFTA resolution.

Lastly, and the impetus to a late week surge, was the passage of a mundane budget bill that paves the way for tax reform in coming months. Legislative efforts are underway to attempt to bring a bill to the floor before year end, however, that seems ambitious given the breadth of full blown tax reform.

With all this going on, equities surged and the interest rate rose. The bull market was alive and well! As inflation remains uneventful, growth is underway, and corporate earnings are on the rise, there are little signs of a correction in sight. But, isn’t that just when you would least expect it?

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