Business

Last December we joked that the Norwegian sovereign wealth fund had responded to sinking returns and withdrawals required to fund budget deficits by allocating another $130 billion in assets to what appeared to be an already massively overpriced equity bubble in return for an extra 40bps of "expected average annual real returns." (see: Norway Buying $130 Billion In Global Equities As Sovereign Wealth Fund Continues To Bleed Cash).  The extra equity purchases pushed the fund's total equity allocation to a staggering 70% of their $860 billion in assets under management. 

The Federal Reserve has manipulated bond prices for the last
10 years.  Yields in the US and abroad
are lower now than during the Great Depression – a period in time that could
justify such low yields.  For those with
short memories, bond markets are more expensive than before and right after the
financial crisis of 2008.  Longer dated
yields are at least 300 basis points richer than typical when inflation is
running around 2% as it is today.  Yes,

It is virtually guaranteed that tomorrow the FOMC will make history by officially announcing the Fed's plan to begin shrinking its balance sheet through the gradual phasing out of bond reinvestments, which however in a world in which other central banks continue to pump $125 billion per month, will hardly by noticed by markets at least in the beginning.

Back in July, the state of Illinois narrowly avoided a junk bond rating with a last minute budget deal that included a 32% in hike in income taxes.  Republican Governor Bruce Rauner vetoed the budget and called it a "disaster," but both houses of the state legislature voted to override his veto.  Meanwhile, S&P and Moody's were apparently both convinced that the budget deal was sufficient for the state to remain an investment grade credit and all lived happily ever after, if just for a few months.  Per CNN:

After claiming its 27th victim of the year in the form of the Toys 'R' Us bankruptcy filed earlier this morning, the Amazon-induced retail bloodbath of 2017 has just turned full-on apocalyptic.  According to data aggregated by Reorg First Day, the Toys "R" Us filing brings the total amount of defaulted retail debt to over $14 billion so far in 2017. 

All of which should be sufficient to drive U.S. equity markets to fresh new highs before the end of the day.