Now it's official.  This is the longest economic recovery/expansion ever.  I mentioned a few years ago why much better days were ahead -- rising personal income, employment, business investment and productivity.  And it's still true.  Some believe expansions die of old age.  Not so.  Australia's is 28 years old.  Expansions end when the reasons they began and continued are no longer there or likely to reappear soon.  They also die when excesses build.  We are not there yet.  

The "Sell in May" crowd had their day and stocks fell, but not for long.  Stocks turned higher in June with the S&P 500 rising 6.9 percent, the best June in 64 years.  July is off to a good start with stocks closing at a record high on earlier this week.

One trigger for the recent bull run was the near certainty that interest rates will be cut soon and cut more later if the somewhat weaker economic data continue to show a softening but still healthy economy.  Rates are being cut in Europe (record lows), Japan and Asia.  Australia cut its short-term rate to one percent, the lowest ever.   No one is worried about inflation, which is why bonds worth $15 trillion or more have negative yields.   In Germany the ten-year bond yields a negative 0.40 percent.  In Japan theirs is a negative 0.20 percent.  You can earn 0.22 percent in Spain's ten-year bond.  Have such low and negative rates had a significant impact on economies in Europe and Asia?  No.  Lower rates may not spur the economy here more than a token.  Still, they would boost stocks.

Another trigger appeared when banks that passed their annual Federal Reserve stress test (all did) were given the green light to increase dividends and buy back stock.  All the larger banks raised their payouts.  Even Wells Fargo, which is still under a cloud, raised its dividend 13.3 percent to 51 cents quarterly where it yields 4.3 percent. 

I can't avoid coming back to what should seem obvious to all, but clearly isn't.  I'm referring to the unattractive alternatives to stocks.  They are becoming even more unattractive as yields fall.

There will be even more new highs in the second half, though stocks won't rise as far nor as fast as they did in the first half.  Why?  Investing is all about earnings.  Earnings this quarter will be virtually flat compared to a year ago and no one is optimistic that profits will be the market's driving force anytime soon.