We heard a month ago that the market had its worst December since 1931 with the Dow Industrials and S&P 500 each off 9 percent. That was then. In January the S&P 500 rose 7.8 percent, the best January since 1987. If the rise were measured from Christmas Eve, it would be close to 15 percent! Meanwhile, payrolls increased by 304,000 in January, its second month of super impressive gains. In December weren’t people saying we were in or entering a recession? All that talk and the panic selling seems ridiculous now.

Investing is primarily about future earnings and to a lesser extent interest rates. Even after the sharp rise, the outlook for them is reason enough to expect higher prices ahead. 

First, the rate outlook. No one should say that the Fed is inflexible. After all, in October they were forecasting three rate increases this year, maybe four. In last week's press conference, Fed chief Powell said there may very well be none. What happened over three months?  Stock markets here and overseas fell and there was increasing talk of a recession coming later this year. Volatility rose to unsettling levels not seen before. The market was telling the Fed it is overshooting, that inflation is not a threat (it's falling), and raising rates, even more, will undermine an otherwise very healthy economy that is not overheating. So the Fed changed. Stocks and bonds rallied.

As for earnings, many high-profile companies have reported solid results and 75 percent are topping estimates. A few industrial companies have come up short and others have tempered their outlook for this year. Amgen is one of the latter. DowDuPont is another. The common thread on the earnings conference calls has been caution regarding this year's outlook. CEOs have pointed mostly to conditions overseas -- in China, Germany, the U.K., and most of Europe. To a far lesser extent they see a slowing growth picture here as well (everyone does). Few have mentioned the "R" word (recession), which is a remote possibility later this year. As for 2020, who knows? Much can happen between now and then. No one really knows.

The earnings outlook remains positive, though as expected to be growing at a much slower pace than we saw last year. Earnings growth of five percent is not shabby. The bottom line is that last year was a terrific one overall for profits and to a smaller degree revenue and this year cannot match it, but growth is growth.