Few analysts are so sanguine now, especially after Republicans could not agree last month on how to repeal the Affordable Care Act, after years of promising to do so. If anything, simplifying the tax code or investing in new roads and bridges seems farther out of reach than ever.
But a market surge based on political hopes has been replaced by one more firmly grounded in the financial realm.
Besides steady economic growth or less regulation, investors also have been encouraged by the loose reins of central banks like the Federal Reserve, which have helped keep interest rates not far above their historic lows. Inflation, too, remains tame, with price increases in recent months actually falling short of the Fed’s targets.
At the same time, with yields on safe assets like government bonds so minuscule, there are few appealing alternatives to stocks for investors, according to Torsten Slok, chief international economist at Deutsche Bank.
“No matter how you look at valuations, they are high,” he said. “But as money flows into pension funds every month and needs to be invested, why would I put it in bonds?
“Corporations in America and Europe are still inventing new products and finding ways of doing things more efficiently,” Mr. Slok said. “This is separate from the political theater around the world.”
Moreover, corporate earnings — the fundamental driver of individual stock performance — have been robust.
The strength has spanned sectors ranging from technology to restaurants, as seen in the rise of almost 5 percent in Apple’s shares on Wednesday, or McDonald’s jump to a record high last month. Both are Dow components.
“The first six months of the year have been the best period for earnings growth since 2011,” said Phil Orlando, chief equity strategist at Federated Investors.
Still, many Wall Street investors who are bullish over the longer-term, including Mr. Orlando, concede that the risk of a stock market correction was rising.
“We’ve had this fabulous run since the election,” he said. “But could we see an air pocket in the next few months? Absolutely. Our best guess is that the next 5 percent move is more likely to be down than up.”
Investors have also voiced concerns that trading has been unusually placid — volatility recently sank to a two-decade low, and Wall Street has not had a correction, usually defined as a drop of 10 percent or more, since early 2016. With the current…