The bump isn't just Trump: What's driving the stock rally

NEW YORK -- The stock market is hitting new heights, and yes, excitement about President Donald Trump's policies is part of the reason for it. But it's not the only one, analysts said.

Even if Trump had lost the election, many professional investors and analysts said they still would have expected stocks to rise, just perhaps not to the same degree.

The Standard & Poor's index has leapt 11.6 percent since Election Day, packing more gains into four months than it's had in five of the last six full years.

It dipped a bit Thursday, but it's still close to its record set a day earlier.

Here's a look at some of the factors behind the strong run for stocks:

The Trump bump

The first reaction for markets to Trump's win of the White House was confusion.

Many investors had been expecting a victory for Hillary Clinton, and markets around the world tumbled on election night as the result became apparent.

But they reversed course within hours.

The reason: Investors are expecting the Trump White House to push through tax cuts for businesses and loosen regulations on them.

Lower tax bills for companies should lead to an immediate rise in earnings, and stock prices tend to track profits over the long term.

Easier regulations also should help businesses, the thinking goes, particularly big banks and other financials that have been under restrictions imposed after the financial crisis.

The economy is improving

The unemployment rate in January was 4.8 percent, and economists see the economy as close to full employment.

A report Thursday showed the fewest number of workers applied for unemployment benefits last week since Richard Nixon was in the White House.

Improvement was underway before Trump entered the White House, but his election has spurred things along.

Optimism among small businesses, for example, spiked higher after the election and is at its highest level since 2004, according to surveys from the National Federation of Independent Business.

Confidence also jumped for regular households after the election, and consumer confidence is at its highest level since the summer of 2001.

If that translates into more purchases at stores and elsewhere, it should drive even more economic growth.

Other economies around the world also are improving, raising expectations for profits of big U.S. companies, which do a lot of their business overseas.

Higher confidence

After years of hiding out in bonds and other safer investments, retail investors began creeping back into stock mutual funds and exchange-traded funds after the election.

Investors plugged $20.7 billion into U.S. stock funds in November, the biggest month in nearly two years.

They've followed that up with more purchases.

That buying has helped bid up stocks even more.

Corporate profits

Earnings per share for companies in the S&P 500 were nearly 6 percent higher last quarter than a year earlier, with nearly all of the companies reporting, according to S&P Global Market Intelligence.

It's a sharp turnaround from a year ago, when low oil prices and other factors were pulling down profits for S&P 500 companies.

Profit growth was particularly strong for technology and financial companies. Microsoft's earnings rose on stronger sales of business software, for example, and investment banks reported a strong quarter for their trading operations.

But just as each of these pillars has helped to lift stocks in recent months, a weakening of any one of them could remove some support.

If tax cuts come later than expected, or if they end up being only minor ones, it could mean a drop for stocks.

Critics also worry stock prices have run up at a time when they already were looking overpriced relative to their earnings.

One popular way to measure whether the stock market is expensive is to compare the S&P 500's level against its earnings over the prior 10 years, adjusted for inflation.

By that measure, which was popularized by Nobel-winning economist Robert Shiller, the S&P 500 is close to its most expensive level since the dot-com bubble was deflating in 2002.