Okay, fine, maybe it is about politics. 'Cause going by the analytical tools I use, the other explanations are imperfect.

The prevailing narrative right now to explain this historic shift into small-cap, value, and generally cyclical companies, is not just that we're going to be able to cut interest-rates, but that it won't be in order to rescue the economy.

Based on the bull steepening in Treasuries (three out of four days since CPI we've had short-term yields falling faster than long-term yields), it doesn't quite add up. That's what happens when the Fed is forced to cut because the economy is slowing down. If an outlook of spending and economic revival were correct, long yields wouldn't be falling as hard as they are, and term premium would likely be seeping into auctions. It would look more like the second half of last year when GDP revisions were going up, instead of going down as they are now.

So, the easiest way to resolve the tension in the market is to assume the growth part of the narrative is overhyped and mispriced in the economically sensitive companies that are surging right now.

But here's where the policy angle may be factoring in. Cyclicality does overlap significantly with small businesses that might get a boost if there is a fresh path towards deregulation and lower taxes. It wouldn't save broken business models over the long term, but it could be stacking on top of the lower rates expectation as a way to reprice extended longevities of unprofitable companies.

Finally, and most abstractly, but perhaps most importantly, maybe we just had to hit our low as a society before bouncing back, and stocks see a brighter future. To be honest I sort of want to puke when stocks rally after the attempted assassination of a former President and candidate, but perhaps even the most extreme events – if they end up bringing Americans together rather than driving us further, impossibly, apart – maybe there's something hopeful to be said about the overall future functioning of our beautiful but twisted machine.

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