The S&P 500 has raced to a new all-time high and other major indices are on the cusp.  Many have been caught flat-footed by this move, and others have ridiculed it. However, at the end of the day, no one is going to pay your mortgage or that dream vacation, so here’s how I see this move.

The stock market rally is ‘long in the tooth.’  It’s the second-longest bull market in history and it has spent a year digesting gains.  Would-be sellers have had many chances to bail, and while there have been massive outflows from individuals and institutions, key support points held.

Then there’s the composition of the market rally.

Utilities have been the ultimate safe haven.  Not only throwing off huge yields, but the XLU is also up 21% year-to-date.   How does one explain irrational cautiousness?  A part of the move in the sector has been a wave of consolidation, which seems to be branching out throughout the broader market as well.

The other equity ‘safe haven’ consumer staples, also up 10% for the year, are marked by moves into household names like Campbell’s (CPB) and General Mills (GIS).  Yes, soup and cereal are rocking because we eat more of both when the Fed lowers interest rates. 

I’m being facetious only to make a point.

Whether it’s the Fed, the elections, or years of skepticism that’s created massive barnacles of doubt, so many folks tell me they’re okay with missing the rally.  They also admit not to be fixed right for retirement or the economic freedom they hope to enjoy one day.

In addition, I don’t “play” the stock market; I believe in investing in great American companies, but I also understand that the nation of investing has changed. Hence, I am reluctant to let huge gains linger, but I  also loathe not owning stocks that are growing, taking market share, and executing. 

Meanwhile, after the closing bell, Alcoa (AA) kicked off earnings season beating consensus on the top and bottom line signaling strength in autos, engineered products, and 3-D printed parts.

There is money in this nation, but individuals and businesses alike have been reluctant to spend or invest it, but that’s changing a little for the former.  Perhaps corroborating increasing evidence of an overall increase in consumer spending, the maker of recreational vehicles, Thor industries (THO), is trading huge volume as earnings consensus is going through the roof. 

If signs continue, and the economy is improving and can survive into the next presidency, then a clean breakout could make the second half an easier and more profitable ride for investors.

Today’s Session

The upside bias remains but there is also a cautious undertone.  For purists, one of the biggest issues has been weakness in transportation names.  Recently, rails have shown life and car rental names are up on takeover speculation but airlines have been grounded.

This morning the airlines are taking off (pun intended) on earnings results from United Airlines where margins improvement really stood out.  (I’ve had too many unpleasant experiences with the company to ever own the stock but it doesn’t mean it can’t go higher from here.)

 There will be no Dow 18,300 hats and that’s great news.