Kelly Evans: What Just Happened.

Let's quickly review what's happened this week, even before today's trading session begins. We just had the presidential election, the busiest week of earnings, and the Fed's latest rate decision. To cap things off, Nvidia replaces Intel in the Dow today, as the company's market cap has now reached $3.65 trillion, putting it comfortably ahead of second-place Apple.

The list goes on. The Nasdaq closed above 19,000 yesterday for the first time. The S&P is fewer than 30 points away from crossing 6,000. The small-cap Russell 2000 is up 10% just since Monday.

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Each of the main events this week contributed in its own way to this remarkable performance. The election goosed, well, everything, but especially small-caps and crypto (the latter is the best-performing asset class this year, up 42%).

Earnings on top of that seemed to send many shorts scattering. Lyft was up 30% at one point yesterday, while Upstart was up 28% (check out this fascinating interview with CEO Hayden Brown), Dutch Bros was up almost 40%, and Toast jumped 13% after hours to cap a near-80% year-to-date gain. "Late 2020 vibes," joked one commentator, referring to the meme stock era.

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And then the Fed lowered interest rates again yesterday, by another quarter-point. They loosened, in other words, financial conditions even with stocks already soaring, contributing to the liquidity party. Plenty of economists think this is prudent and appropriate; I just hope it's not a repeat of the 1998 Greenspan rate cuts (in response to a massive hedge fund collapse) that goosed the dotcom bubble.

Now, some would argue the rise in long-term rates since they started cutting in September is a headwind itself, and a tightening of financial conditions. Okay, fine. But from September 1998 through January 2000, the 10-year yield surged from 4.4% to 6.7%, and still didn't prevent the dotcom bubble from forming. (The CPI also went from sub-1.5% to over 3% at the same time.) Rising yields, in other words, are symptomatic of an overheating economy, not a brake on it.

Eighteen months ago, it looked like the economy was rolling over. Not only have things held up remarkably well since then, but if hiring starts to pick up again, we'll really be off to the races. And that's what the market seems to be telling us this week.