4. Nevertheless, we are seeing some financial excesses. Economic expansions typically produce excesses that bear watching. Cornerstone Macro identified six: 1) high real unit labor costs, 2) high house prices, 3) high auto debt levels, 4) high commercial real estate prices, 5) too much corporate debt, and 6) excessive profit dispersion.4

5. The political backdrop also looks uncertain. Congress returns to work this week to resume work on health care reform. This issue is important in its own right, but will also influence tax reform discussions set for later this year. Republicans are far behind schedule, and failure to make progress may eventually jeopardize their prospects for the 2018 mid-term elections.

6. The outlook for corporate earnings is strong. Consensus expectations for year-over-year earnings-per-share growth is 8% for the second quarter and 11% for the full year.5 BCA Research is forecasting EPS growth could hit 18% on a four-quarter moving basis later this year before moderating in 2018.5

7. Downward pressure on oil prices is likely to persist. Supply is too high as production levels remain elevated. And demand is soft thanks to slow global economic growth, increased efficiency and rising use of alternative fuel sources.

8. Equity market technicals point to internal leadership changes. Strategas Research made the following observations: 1) The combined weight of the largest 10 stocks in the S&P 500 Index is only 19%, lower than the long-term average of 20% and significantly below the 27% peak reached in 1999. 2) On an equally-weighted basis, health care is the leading sector while technology is in second place. 3) The energy sector has given up all of its 2016 outperformance and sits at a relative low versus the broader market.