Forget 1987—Here's the real risk to the Trump rally

After hitting 13 record closing highs in the last 14 days, investors are making the inevitable comparisons between the action in 1987 and today's Dow Jones Industrial Average.

It's quite true that the run-up in stock prices, since the November election and in the first days of 2017, has been quite impressive.

The Dow is up more than 18 percent since the November bottom and up over 7 percent year-to-date. If the current, torrid, pace of gains were to continue through August, the Dow would be up about 30 percent for the year.

While that would be quite a feat, it would still fall short of the parabolic move that drove the market up more than 36 percent from January of 1987 until August 25th of that year, when the Dow peaked at 2722, the all-time high of the "Roaring 80s."

The Dow first crossed 2,000 on January 8th, 1987 and went on a blistering rally, despite a sharp rise in interest rates that began in April; a continued and pronounced slide in the dollar that had begun in the autumn of 1985; the threat of a trade war with Germany and the overuse of aggressive program trading strategies that drove the market ever skyward.

After peaking in August, the market dropped 30 percent from its all-time high over the course of the next two months, nearly 23 percent of that coming on a single day … October 19th, 1987, also known as "Black Monday."

There are, of course, some similarities between the froth in today's market and in the behavior of stocks in 1987.

Valuations are equally high, interest rates are rising, tax cuts and de-regulation are on the agenda and our president is hailing the dawn of an American Renaissance, of sorts.

"The real risk to the market is the failure of Washington to deliver on the promises included in Tuesday's presidential address to Congress."

However, even if interest rates are on the rise as they are today, they are still extraordinarily low in comparison to where they were 30 years ago.

For instance, from April of 1987 up until the October 19th "Crash," the yield on the 30-year Treasury (the accepted benchmark of its time) rose from about 6 percent to almost 10 percent, while corporate profits were peaking, the dollar was slumping and inflation, both in consumer and asset prices, was rising sharply.

IPOs were on fire, stockbrokers were minting money, and a buyout craze was in full bloom, using a great deal of borrowed money.

In contrast, interest rates are rising relatively gently, corporate profits are rebounding, inflation, while nearing the Federal Reserve's target of 2 percent, is well-behaved and the dollar is rising, not falling fast, as it did back then.

It's quite possible that the stock market is wildly overbought in the short-run and due for a short and scary pullback. That's what bull market corrections are made of.

The real risk to the market is the failure of Washington to deliver on the promises included in Tuesday's presidential address to Congress.

If there is no tax reform, no massive de-regulation which the market is, quite literally, banking on; no immigration reform; no infrastructure spending and no ramp up in defense budgets, this market will be in trouble.

For the moment, the comparisons to 1987 are premature and the secular bull market will likely continue, even if there is a brief pause that refreshes.

In the longer-run, I am concerned that an accelerating, deregulated, turbo-charged economy will lead to speculative excesses, and a faster pace of rate hikes from the Fed. At that point, it will be time for a speedy exit from Wall Street.

That appears some time off, in my humble view. I remain ever vigilant for signs of trouble, but the running of the bulls will continue unless and until the bear has a reason to re-emerge from hibernation.

Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street. Follow him on Twitter @rinsana.

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