The Dow, S&P 500, Nasdaq and Russell 2000 every hit new all-time highs Monday.

Investors are giddy with pleasure and so they clearly imagine that each huge blue chip multinationals and smaller firms that do most of their enterprise in the U.S. will proceed to thrive.

So is this the Donald Trump rally? Or the Janet Yellen rally?

Some strategists imagine Trump’s stimulus plans and speak of killing many burdensome rules are the causes shares are hovering.

Or maybe this is higher characterised as a continuation of the Barack Obama rally as a substitute?

You might argue that POTUS 44 has dealt POTUS 45 a reasonably good hand.

The strong job market and total financial system that Trump inherited could also be the cause customers and companies are so assured.

But buyers (and monetary journalists) are sometimes fast to provide the president extra credit score — and blame — than they in all probability deserve for the efficiency of the inventory market.

RBC strategist Jonathan Golub pointed this out in a report on Monday, one which was aptly titled “Message to Market: It’s Not All About Donald.”

Related: Trump isn’t killing the bull market

Golub famous that the S&P 500 rose almost 7% from late June by Election Day — a time when most polls have been predicting that Hillary Clinton could be the subsequent president.

But shares have continued to rally since then, rising one other 8% since Trump pulled off the upset (not less than to the mainstream media and Wall Street) victory.

You cannot have it each methods. It makes no logical sense to counsel that shares rallied as a result of buyers believed Trump would lose and that they continued to rally as a result of Trump did not lose.

Bond yields have additionally been rising since Trump received, a phenomenon that many buyers have attributed to the probability of stimulus from the president and Republican Congress.

Yet Golub factors out that the yield on the 10-year U.S. Treasury was going up throughout the late summer time as effectively.

Of course, many buyers have been anticipating stimulus from Clinton too.

Yet as soon as once more, many buyers are claiming that Trump is the catalyst for one thing that not solely was happening earlier than he was elected, however was taking place as a result of many thought he would lose.

Related: Stocks have avoided a 1% dive for an unusually long period of time

So it is odd that Trump is being cited as the foremost cause for a market rally that started months earlier than anybody felt he might win.

What’s actually happening? The one fixed throughout the previous few months is the Federal Reserve.

Yes. the markets are reacting to Washington. But they’re paying nearer consideration to Janet Yellen, not the White House.

The Fed made it crystal clear earlier than the election that it might in all probability elevate rates of interest in December and accomplish that just a few extra instances in 2017 no matter who received the race for president.

The excellent news for buyers is that the U.S. financial system appears to be rising steadily, however doesn’t look like liable to overheating.

Related: Here’s why the world’s largest money manager is worried

The most up-to-date jobs report confirmed that wages grew at a good price of two.5% yearly. But that is not almost excessive sufficient to spark fears of runaway inflation and lead the Fed to aggressively elevate charges.

Even if Yellen and the Fed hike charges thrice this yr, they’re possible to take action by only a quarter level each time. That would push the Fed’s key short-term price to a spread of 1.25% to 1.5%.

That’s nonetheless extraordinarily low. At these ranges, shares would nonetheless be extra enticing than bonds. Corporate earnings ought to be capable of maintain rising at a wholesome clip. And customers would in all probability maintain spending.

So buyers could be clever to maintain a detailed eye on Yellen and never simply have a myopic give attention to the president,

With that in thoughts, Yellen is set to testify in entrance of Congress on Tuesday and Wednesday. And what she says about the timing and magnitude of future price hikes might wind up conserving the rally going full steam forward — or stopping it useless in its tracks.

Trident BloggerMoney (New York) First revealed February 13, 2017: 12:30 PM ET

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