Illustration: Sarah Grillo/Axios

Risk assets have jumped over the past week and continued their rally on Wednesday, with the S&P 500 gaining for a fourth straight day and posting its highest close since March 4, while the Nasdaq ended the day just 1.4% below its all-time high.

What it means: If it hadn't been evident before, Wednesday's market action made clear that the bulls are back in charge.

What happened: It wasn't just stocks that rallied, though.

  • The dollar, which had been benefiting from global risk aversion, fell to its lowest in nearly three months against a basket of major global currencies and slipped to monthslong lows versus risk-on plays like the Australian dollar and emerging market currencies.
  • Treasury prices weakened with the yield curve steepening.
  • Oil jumped to its highest since early March.
  • Gold fell by nearly 2%, hitting its lowest since mid-May.
  • Equities gained broadly, as airlines, credit cards, banks, apparel, homebuilders, machinery and rail stocks led the way.

But why?: Explanations for markets' ebullient behavior in the face of a U.S. economy that looks to be coming apart at the seams — as corporate bankruptcies, trade tensions and widespread unrest have grown — were varied.

The big picture: Economic data has improved. "Statistical evidence that April was the bottom comes from initial and continuing jobless claims, ADP payrolls, PMI surveys and probably this Friday's nonfarm payrolls report," Joseph Trevisani, senior analyst at FXStreet, tells Axios. "Equities are convinced."

  • ADP’s private payroll report showed 2.76 million people lost their jobs in May, which was far less than the 8.75-million estimate.
  • Continued jobless claims declined by 3.9 million to just over 19 million.
  • Data from the Institute for Supply Management showed the U.S. services sector contracted less than expected, rebounding from an 11-year low.

Many also believe the market has simply become a representation of extraordinary monetary policy by the Fed, which has pushed into almost every corner of the bond market and increased its balance sheet of bond holdings to over $7 trillion, more than 10 times what it was in 2007.

  • "What the Fed has done has kept the lifeblood of low-cost corporate financing flowing," says Nela Richardson, investment strategist at Edward Jones. "That's what the market is largely responding to."

What's next? Good question. "I don't think standard economic models are much good at forecasting right now," Nobel Prize-winning economist Robert Shiller told CNN Business.

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