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The Wilshire 5000, one of the broadest measures of the stock market, closed at an all-time high Friday.

The Standard & Poor's 500 closed above 1500, the first time since December 2007, and 4% from its all-time high. And the Dow Jones Industrial Average is just 2% shy of it's record level.

What's driving the markets?

• Politics - or lack of it. Politicians in the nation's capital have resolved some thorny budget problems, and agreed to push back others. "I think we have a three-month window before government comes back into play," says Jeff Rottinghaus, portfolio manager at T. Rowe Price in Baltimore. Overseas, the Eurozone no longer seems like it's going to dissolve and it massive debt problems have been contained for now.

• Earnings. All that means higher stock prices. So far this year, 148 companies in the S&P 500 have reported fourth-quarter 2012 earnings. Of those, 98 have beat analysts' expectations, 30 have missed, and 20 have matched expectations. That's a decent start to earnings season.

• Prices. Stock prices compared to earnings are cheaper now than they were at the market's previous high in October 2007, says Howard Silverblatt, index analyst at S&P. Stocks in the S&P 500 sell for 15.2 times earnings, vs. 17.1% then.

• Cash. Companies still have oceans of cash on their books, which they can use to pay dividends, buy back shares, hire more employees or buy other companies. Excluding financials, S&P 500 companies have $1.2 trillion in cash on their books, according to FactSet.

Alan Greenspan, then chairman of the Federal Reserve, warned about "irrational exuberance" in the stock market in 1996. "I think this is rational exuberance," says Robert Turner, chief investment officer at Turner Investments in Berwyn, Pa.

At the top of a bull market, he says, investor expectations get ahead of results, but that's not the case today. "Profits bottomed in 2009 and have had a greater advance than stock prices have," he says.

Investors seem more confident now than they were in December and are pouring more money into stocks, Rottinghaus says.

Rising stock prices are an important boost to consumer confidence - which, in turn, is important for future economic growth.

Even so, the stock market is never a sure thing, and this week brings a scad of important economic numbers that could set the markets back. The Federal Reserve's powerful Open Market Committee, which sets monetary policy in the U.S., meets next week. Any unexpected warnings in its Wednesday statement could send markets reeling. And on Friday the Bureau of Labor Statistics releases the monthly report on unemployment and job growth, which markets watch closely as a sign of future economic strength.

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