Stocks Rise as Tax Cuts Trump Job Cuts

This, too, remains to be seen. But Sonders noted corporate profitability has gone from a decline of 22% 18 months ago to a rise of about 11% in the first quarter. "Maybe it's [largely] from cost-cutting but you have seen profits improve at a pace that's historically pretty powerful," she said, further arguing low capacity utilization and rising unemployment are historically lagging indicators in economic recoveries.

Regarding employment, weekly jobless claims rose to a higher-than-expected 428,000 for the week ended May 22, the 14th straight week above 400,000.

In part because of the jobless data, and in part because of rising speculation, the Federal Reserve may buy long-dated Treasuries. The price of the benchmark 10-year note rose 20/32 to 102 18/32, its yield falling to 3.32%. The dollar dipped to 117.22 yen in late New York trading from 117.27 yen Wednesday while the euro rose to $1.1693 from $1.1678.

We didn't discuss the dollar but Sonders didn't seem too concerned about recent strength in Treasuries, which many suggest portend further economic weakness. She attributed much of the recent rally to "massive inflows" from retail investors, historically not the best market-timers, and suggested yields probably "don't have that much more room on the downside."

As for valuation concerns, the strategist said low inflation is supportive of higher price-to-earnings ratios, noting that when inflation has been under 2% P/Es have historically been around 22. Thus, the market is currently "fairly valued" in her estimation. (On related note, oft-bullish fund manager Kenneth Fisher observed the dividend yield of the S&P 500 is now above 10-year Treasury yields -- based on forward earnings projections. "Stocks aren't expensive," Fisher declared in the current issue of Forbes.)

Other positives Sonders cited included a better technical tone to the current rally vs. prior ones since the peak, most notably expanding breadth, and diminishing "competition for returns" from money market funds and Treasuries.

Aalthough she described her case as "relative optimism" vs. unfettered bullishness, Sonders didn't seem worried about much Thursday, accurately reflecting the broader market itself.

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