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We’ve witnessed an enormous amount of complacency over the last few months. Whether it’s the latest revelation about Donald Trump or geopolitical worries coming out of North Korea, nothing seems to spook the bulls.

That is, until several key global central banks have talked about raising interest rates—the Bank of Canada and the Bank of England—or ending massive bond buys—the European Central Bank.

Let’s state the obvious: stocks never move up in a straight line.

Let’s state the obvious: corporate profit growth is the biggest variable in determining the direction of stocks over the longer term.

Remember when QE in the U.S. was ending? That would kill the bull market. Then we were subject to pundits who claimed that higher interest rates are bad for stocks.

Well, QE is long gone, the Fed is hiking rates, and the Fed appears set to gradually wind down its balance sheet, probably in September.

Where am I going with this? That’s simple. By itself, winding down stimulus by the ECB or rate hikes by other banks are unlikely to be enough to derail the bull market IF the removal of monetary stimulus is in response to faster global economic growth.

Sure, we may see some day-to-day volatility, but rates remain very low among the developed economies.

Yes, we will eventually write the obituary for the second-longest bull market since WWII; however, if history is a good guide, the economic fundamentals and a recession will likely set the fuse for the next significant downturn, not simply chatter that rates may go higher.

That’s a phrase reality TV star Donald Trump uttered with regularity during his run on The Apprentice.

Tuesday afternoon, it became a reality for FBI Director James Comey, setting off a political firestorm and generating fears it would roil markets on Wednesday.

While the politicos and the press are salivating, investors reacted with one giant YAWN. Just look at Wednesday’s response for stocks, Treasuries, the dollar, the VIX, and gold.

How the market digests new revelations in the days and weeks ahead would be speculative. For now, the market sees this as a political event, not an economic event—much like Syria, North Korea, and the just-concluded French election. Put another way, it’s noise.

What about tax and health care reform? Some are concerned this will derail the “Trump Agenda.”

While stocks soared amid expectations of business-friendly tax cuts, more recently, a strong Q1 earnings season, upbeat guidance, and stronger global growth have picked up the slack. Think of it as the passing of the baton.

Moreover, any cut in the corporate tax rate has not been factored into analyst earnings forecasts. It would be icing on the cake at this point.

Longer-term, it really is “the economy, stupid.” That’s a phrase made famous in the 1992 presidential campaign.

A quarter century later, it’s still relevant to investors.

It’s earnings season, and we’re right smack in the middle of a deluge of reports.

With over 60% of firms having reported, 69% of S&P 500 companies are topping analyst expectations per Thomson Reuters. That’s slightly above the historical rate of 64%.

You see, companies have been conservative with guidance, and analysts dutifully lower estimates. So we typically see firms top profit expectations.

If we look at how firms are doing versus a year ago, it gets more impressive. Currently, S&P 500 profits are expected to increase by 8.3% versus a year ago. That compares with an estimated 6.1% rise when Q4 ended.

At 8.3%, it would be the best showing since Q3 2014.

Earnings growth continues to accelerate following a four-quarter earnings recession that ended in Q2. Notably, the earnings recession can be blamed entirely on what happened in the energy sector, not a contraction in the general economy. Throw out energy and earnings never turned negative…close, but not negative.

Looking ahead

We may see the first annual double-digit rise in S&P 500 profits in six years, according to current forecasts. Of course, trying to call profits more than a quarter out gets dicey.

What happens to the dollar, oil prices, and U.S. and global economic growth all play into the profit equation. Moreover, will we see a sharp reduction in the corporate tax rate this year, and will firms be able to maintain record profit margins?

Valuations seem high, but earnings and expectations of earnings have historically been the biggest driver is stock prices.

Wow, last night’s election shocked nearly everyone, with Donald Trump beating Hillary Clinton in a hotly contested race.

I won’t go into a heavy political analysis. I’ll leave that to the politicos. Instead, I want to look at the election and how the professional pundits once again missed the undercurrents that foiled the consensus once again.

Brexit wasn’t supposed to happen. Trump’s win wasn’t supposed to happen. And stocks weren’t supposed to rally in the wake of a Trump win.

Brexit produced a sharp, two-day selloff before shares quickly and unexpectedly claimed new highs. A Trump win was supposed to produce a Brexit-like reaction in shares.

It did, but you had to be a professional investor glued to your PC or a Bloomberg terminal to catch it.

Brexit light

Tuesday evening Dow futures plunged about 800 points when it became clear that Trump was on the road to victory. But a curious thing happened. Futures began to cut losses. Shares, which experienced some initial uncertainty at the Wednesday open, finished the day with big gains.

So much for the consensus, which I must concede, I had bought into.

Market timing and the fundamentals

That said, today’s market action favors a well-crafted, long-term investment plan rather than the helter skelter of market timing.

If you went to cash in anticipation of market volatility, you missed out on today’s rally. The same can be said if you sold out in the Brexit selloff.

I won’t predict what may happen in the days and weeks ahead. Who can accurately and consistently predict the future? No one.

What I know is the fundamentals that have historically driven stocks higher over the long term remain in place.

Ironically, President Obama may have summed it up best on Tuesday evening when he said, “No matter what happens, the sun will rise in the morning.” It did.

The Fed meeting has come and there was no hike in interest rates. Was anyone really surprised? I doubt it.

The key takeaway: a Fed that is implicitly telling us it’s time to roll the dice again in December.

Unlike last year, when the Fed explicitly telegraphed the next meeting was on the table, Yellen & Company are giving themselves a little more wiggle room in the event something pops up and they hold off. Remember, it is a very cautious Fed.

Given today’s employment report and upward revisions to August and September, we’re on track for the second rate hike in the cycle.

At this pace, the fed funds rate might just make it to 2% by the start of the next decade (yes, said with a bit of sarcasm).

“Several (Fed) members judged that it would be appropriate to increase the target range for the federal funds rate ‘relatively soon’ if economic developments unfolded about as the Committee expected.” That’s according to the just-released minutes from the September FOMC meeting.

Never mind that the economy has created nearly 15 million jobs over the last six years. Never mind that the unemployment rate is 5.0%, half what it was at its peak. But try convincing the Fed it’s time to hike rates even a second time in the economic cycle.

It’s a very dovish, very cautious Fed when it comes to pulling the rate-hike trigger. It’s what I sometimes call an “All my ducks in a row” Federal Reserve.

Think about it.

Worries about China, a wobbly stock market in January, a rising dollar, a surprise Brexit vote, and a weak employment report (remember May’s disappointment?). None of these created any significant damage to the U.S. economy. Yet, they all forced a pause in the rate-hike cycle.

So, what might be lurking behind the next corner that might persuade the Fed from going ahead with another 25 bp increase? Stay tuned.

Well, it was bound to happen. You know, a too big to fail bank in Europe creates headlines at home. This time, it originated in Germany.

Deutsche Bank is Germany’s largest bank, sporting assets that are just shy of $2 trillion. It’s also Europe’s fourth-largest bank.

Like many of its counterparts in Europe, its capital cushion isn’t where it needs to be in the event of a serious economic downturn.

Further, negative interest rates and a weak European economy are a hindrance to profitability.

Unlike major banks in the U.S., which were much more aggressive in raising capital post-2008, European banks gambled on faster economic growth to bolster their capital positions.

It hasn’t been a good bet.

Lehman Moment—not likely

Unlike 2008, the economic fundamentals aren’t deteriorating, Deutsche isn’t choking on toxic assets (that we’re aware of), its funding sources are more diverse, and it can tap into a liquidity lifeline from the European Central Bank. In each case, the same couldn’t be said of Lehman Brothers.

Moreover, we know what happens when a systemically important financial institution fails. While new EU rules limit taxpayer support for bailouts, it does not prevent them.

And it’s hard to imagine a scenario where Germany would allow its largest bank to implode in a disorderly fashion, taking the German economy with it.

That doesn’t mean we can’t see short-term volatility in U.S. markets that are tied to a European bank, but a crisis sparked by the disorderly failure of one of its largest banks is unlikely.

Have you ever driven a car with a manual transmission? If so, you know that second gear isn’t the gear you want if cruising speed is your goal.

Yet, second gear is how I would describe today’s economy. Not just today, but over much of the expansion.

I could point to plenty of data, but let’s look at two closely followed indicators that span across the private sector.

During August, both the ISM Manufacturing Index and the ISM Non-Manufacturing Index came in well below expectations.

Not to worry, the September releases, which were out on Monday and Wednesday, suggested an acceleration in growth, especially for the service sector. At a reading of 57.1, the broad-based service sector has kicked into gear! Right?

Well, not quite so fast.

Let’s compare the readings to a baseball game. The outsized jump in the service indicator would be the equivalent of a home run. But in today’s subpar recovery, the occasional home run is mixed in with singles, doubles, and a fair number of strikeouts.

While the latest readings are encouraging, let’s not get too excited. Digging into the underlying trends and several months worth of data, it’s safe to say the economy is growing, but it’s far from robust growth.

In other words, we’re still stuck in second gear.

Everyone knows the fable about The Boy Who Cried Wolf. You know, the shepherd who mocks the villagers that respond to his false cries for help. When a real wolf appears, no one lifts a finger.

Let’s turn our attention to the Federal Reserve, and the connection will become clear. At the end of last year, the Fed’s dot-plot projected four rate hikes in 2016. Fall is approaching, and so far, nothing.

If it’s not China, it’s the yuan. If it’s not the yuan, it’s a wobbly stock market early in the year. If it’s not a wobbly stock market, it’s a weak May employment report. If it’s not a weak May employment report, it’s Brexit.

All have played a role in delaying the Fed, even as none of these events crashed into the U.S. economy.

More recently, we’ve had three Fed officials—Dudely, Lockhart, and Williams—all explicitly state that the September meeting is in play. But a quick glance at fed funds futures reveals investors aren’t buying it. Currently, futures are suggesting just an 18% chance of a September move. It’s the boy who cried wolf.

On August 26, Fed Chief Janet Yellen will speak at the Annual Kansas City Economic Symposium in Jackson Hole, WY.

I can’t think of a more picturesque setting for a conference that attracts economic heavyweights from around the globe. You may recall that this is where former Fed Chief Ben Bernanke first hinted at QE2.

Yellen’s remarks will be closely followed for any explicit hints that September is on the table. Even then, we have one more jobs report before the September meeting.

However, let’s not forget that a weak May number forced Yellen to backtrack in early June. Again, I’m reminded of Aesop’s Fable, The Boy Who Cried Wolf.

Up, up and away–that’s how the latest rally in equities feels. Coming in the wake of Brexit and a whole host of other factors, bull markets really do climb a wall of worry.

For starters, lingering anxieties over the survival of the EU, the euro, and fears Italian banks will implode are just some of international concerns that are preoccupying investors. Then we have negative interest rates and any ominous message(s) global bond markets may be trying to send.

There’s always the tepid U.S. economic recovery and nagging fears that central banks are out of ammunition.

But nothing seems to have deterred investors during July.

Instead, the Street has warmed up to the idea that Q2 will mark the end of the profit recession. And the economic expansion, which isn’t young anymore, still has some life left in it.

But let’s not stop there. Fed rate hikes are expected to be gradual, and companies can’t seem to stop gorging on their own shares via buybacks.

All in all, it has been a perfect recipe for a summer rally.