Fed is pumping in 85B a month, every month. Sequester is a drop in the bucket. Just remain market long and you will keep getting free money. Sell every once in awhile and bank the money. Then buy more. This may go on for 18 more months. DOW 21,000
Economic numbers continue to beat (jobs, manufacturing, and most importantly housing), consumers are still spending, we are in a legitimate housing recovery, Italian election concerns were overblown with yields pulling back in, the Fed hasn't taken their foot off the gas buying 80bn+ of rates/mortgages to keep borrowing/mortgage rates down and of course there are still trillions on the sidelines in cash and bonds yielding 2% for ten years. You just can't stay in bonds for much longer and it's painful being on the sidelines after an unexpected 10% rally. I wouldn't say stocks are cheap right now, but they aren't expensive either.
Great question, and I too am perplexed. I think it's two things: 1) Ultimately, despite the pain, the sequester may put us on a more sustainable budgetary path; and 2) Stocks are still relatively inexpensive given earnings, etc., and given interest rates, there's really no good alternative place to make money. Just IMHO.