Why U.S. stock indexes are hitting all-time highs amid political and social tumult

 
With all the political and social tumult in the U.S. and abroad, you might expect that the stock market wouldn't be doing terribly well.
Turns out, it's doing just peachy.
The two biggest U.S. stock indexes — the Dow Jones Industrial average and the S&P 500 — have closed at record highs for much of the week. That's great news if you've got any sort of retirement savings, and even better news if you're near retirement.
The strength of U.S. stocks is particularly encouraging after markets took a sharp tumble following the Britain`s vote last month to leave the European Union.
In the hours after the June 23 vote, global markets dipped sharply on worries about what the move would mean for the global economy, as well as concerns that other countries could follow suit.
As you can see in the graph below, both the S&P 500 and the Dow took a sharp dip, but they've recovered well.

There are good reasons for the rally. A strong recent jobs report provided a welcome surprise compared to tepid expectations. Brexit is still a concern, but its overall impact is expected to be more modest than initially thought. Indeed, the International Monetary Fund went so far as to call Brexit's affect on the U.S. economy "negligible."
The bad news is there are signs that stock prices aren't entirely the result of a strong economy and some analysts are worried about the near future.
The main concern is that the market is still moving primarily in response to the Federal Reserve, which has kept interest rates low (so that people don't make much money by holding debt) and adding cash to the financial system through quantitative easing.
The Fed has been pursuing this strategy for the past eight years, when the financial crisis unfolded. Some market analysts point to this practice as a reason that the market continues to trend up.

That brings us back to Brexit. The Fed has been talking about raising interest rates, a move that would theoretically attract more money back to debt and out of the stock market.

Last December, the Fed raised rates for the first time in nine years. That was supposed to be the first in a series of rate increases that would likely take some of the steam out of the market. Those increases are now less likely, especially given even subdued post-Brexit insecurity.
Taken together, this makes for a good situation for stocks, albeit one that makes analysts nervous.
"We're at an extreme level," Peter Boockvar, chief market analyst at the Lindsey Group, told CNN money. "The market is certainly giddy again."
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