Last week, the Standard & Poor’s stock index increased to a record high market capitalization above $20 trillion. This compares with $5.9 trillion when the market hit a low on March 9, 2009. It had taken 20 years to build from $10 trillion. It had reached $15 trillion in 2013.

The capitalization of the S&P 500 is the sum of the market value of all 500 companies in the index. Apple has the largest market value, at around $720 billion, followed by Microsoft, at around $505 billion.

Since President Donald Trump’s election, the S&P 500 has risen close to 9.5 percent, a wealth increase of nearly $2 trillion that historically could be expected to lead to increased spending of $100 billion to $300 billion.

The sharp rally the markets have enjoyed since the election has several causes, notably investors’ focus on the Trump policies that are friendly to business — tax cuts, increased infrastructure spending and less regulation. At the same time, consumer confidence has increased, which means consumers are more willing to buy and businesses are more willing to invest.

Investors are focusing on Trump’s:

• Promises to lower income taxes for both corporations and individuals. Trump used the term “phenomenal” to describe his upcoming tax plan.

• Calls for major economic stimulus, some $1 trillion over the next decade.

• Promises to reduce regulatory burdens for both Main Street and Wall Street.

In addition, the S&P 500’s fourth quarter 2016 earnings growth was a robust 8.4 percent. Some economists anticipate earnings will grow by 11 percent in 2017.

Cautionary notes

What could dampen the market rally?

• A sharp increase in interest rates by the Federal Reserve. Last week, Fed Chairwoman Janet Yellen told Congress that she expects the Fed will need to raise interest rates at an upcoming meeting in order to prevent the economy from becoming overheated and inflation rising too quickly. She expressed concern that the Fed’s policymaking committee could fall behind the curve if it does not raise rates fast enough. Most Fed watchers anticipate three rate increases in 2017 for a total of 75 basis points. The Fed anticipates that the economy will expand at a moderate pace, the job market will continue to strengthen and inflation will increase to 2 percent.

• The imposition of a border adjustment tax to offset the loss of tax revenues, assuming the corporate tax gets reduced from its current 35 percent to 15 percent.

A border adjustment tax would force Americans to pay more for imported goods and services. Target CEO Brian Cornell and the heads of other prominent retailers lobbied against this proposal at their meeting at the White House last week.

Proponents of a border adjustment tax argue that it would even the playing field for U.S. manufacturers. The current complaint is that U.S. manufacturers pay the highest corporate taxes in the world and then are taxed by other countries when they export their products to those countries. This dual tax, plus higher costs of wages and benefits in the U.S., have encouraged manufacturers to shift production out of the U.S.

(The stock market rally also has increased wealth inequality. According to Congressional Budget Office, the top 10 percent of families held 76 percent of the wealth as of 2013, while the bottom 50 percent of families held 1 percent. Wealthier Americans own a disproportionate share of financial assets, so they have benefitted disproportionately from the recent stock market rally.)

In addition, market skeptics have argued that:

• We do not yet know specifics of Trump’s regulatory reforms.

• Market bulls are not recognizing that it could take many months to get legislation passed to approve the biggest change in tax policy since the Reagan administration.

• Conservative Republicans worried over escalating deficits could join Democrats in shelving Trump’s tax proposals.

• The administration might not have sufficient legislative support to replace the Affordable Care Act.

Putting aside those concerns for the moment, let us drink a toast to Mr. Market, the nickname of the S&P 500. Hopefully, I will be able to write someday about the S&P index passing the $25 trillion mark.

Originally published in the Sarasota Herald-Tribune