Mark Lennihan / AP

Markets sprinted into Tuesday's close, with the Dow Jones picking up more than 118 points — its 8th gain in as many trading sessions — to finish up 12.5% since Election Day. Here are three reasons investors are chipper:

  • The promise of corporate tax cuts: No government policy has as much of a direct effect on corporate profits as income taxes. With Republicans promising a 15 percentage-point decrease in the headline corporate tax rate, investors are betting Washington will soon increase corporate earnings without managers having to lift a finger.
  • Rising wages: Years of Federal Reserve stimulus has finally gotten the jobs market hot enough that firms are giving out significant, broad-based wage increases. This has boosted investor optimism that the U.S. consumer can regain its pre-crisis health.
  • The end of an earnings recession: Overall corporate earnings fell for 15 straight months before the trend reversed in the third quarter of 2016. The turnaround coincided with a renewed hope for business-friendly federal policy to send stocks to all-time highs.

Risks abound: There's plenty of evidence that investors are getting ahead of themselves however.

The Shiller PE ratio compares today's stock price with a 10-year average of corporate earnings. Investors are paying more today for a dollar of earnings than at any point during the lead up to the financial crisis, suggesting if Washington can't come through with profit-boosting initiatives, the best stocks can do going forward is move sideways, if not down.

Expand chart
Data: multpl.com; Chart: Andrew Witherspoon / Axios

Go deeper

Updated 47 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 3 a.m. ET: 31,032,045 — Total deaths: 960,729— Total recoveries: 21,255,717Map.
  2. U.S.: Total confirmed cases as of 3 a.m. ET: 6,805,342 — Total deaths: 199,511 — Total recoveries: 2,590,671 — Total tests: 95,108,559Map.
  3. Politics: Testing czar on Trump's CDC contradictions: "Everybody is right" Ex-FDA chief: Career scientists won't be "easily cowed" by political vaccine pressure.
  4. Education: What we overlooked in the switch to remote learning.
  5. Health: The dwindling chances of eliminating COVID-19 — 7 states set single-day coronavirus case records last week.
  6. World: England sets £10,000 fine for breaking self-isolation rules — The countries painting their pandemic recoveries green.

Biden raises $141 million more than Trump

Combination images of President Trump and his 2020 presidential rival Joe Biden. Photo: Sarah Silbiger/Getty Images/Alex Wong/Getty Images

Joe Biden's campaign, the Democratic National Committee and joint fundraising committees raised $466 million cash on hand, the presidential candidate's team announced late Sunday.

Why it matters: President Trump's campaign raised $325 million cash on hand, his campaign communications director Tim Murtaugh announced Friday. In the spring, Biden was $187 million behind Trump and the Republican National Committee.

Virtual Emmys address chaotic year for American TV and society

Emmy Host Jimmy Kimmel during rehearsals Friday for the 72nd Annual Emmy Awards at the Staples Center in Los Angeles. Photo: Al Seib/ Los Angeles Times via Getty Images

The Emmy Awards Sunday night addressed the major U.S. issues this year — including the protests on systemic racism and police brutality, the wildfires engulfing parts of the West Coast, the census, the pandemic, essential works and the election.

Why it matters: Award shows have always addressed wider cultural issues, but this year — amid unprecedented stress and uncertainty — that trend has accelerated.