A new reality could be driving stocks — and it could spell volatility ahead

A new reality could be driving stocks

Despite mounting global geopolitical concerns, the market continues to rally without substantial pullbacks.

Investors may wonder: Are the markets entirely hinged on political outcomes?

Politics has seeped into capital markets in such a way that "all trades are purely political," said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management. Even more pointed, he thinks "all economic data is irrelevant."

He noted events grabbing the headlines: the highly anticipated French presidential election on Sunday, uncertainty in the United Kingdom, and U.S. investors awaiting concrete information from the Trump administration about tax reform and infrastructure spending.

"If [the Trump administration] can't get those two things done in the summertime, then I think a huge part of the 'Trump rally' just simply dies on the vine," Schlossberg said Wednesday on CNBC's "Trading Nation."

Should the far-right and far-left French presidential candidates emerge on Sunday and advance to the next round of elections, he said, that would be the "absolute worst-case scenario for the markets" because it would boost populist movements. In the U.K., Prime Minister Theresa May's call on Tuesday for a snap election in early June pushed the FTSE 100 index down to levels not seen since last June's Brexit vote.

The , on the other hand, fell a mere 7 points by the end of Tuesday trading.

To some degree, waning economic data confirm that political anxiety may not be fully apparent in the market but soon may be, said Miller Tabak equity strategist Matt Maley.

He pointed to weakness in crude oil and copper, along with a leg lower in the Citigroup Economic Surprise Index that he is watching closely. He noted, too, that the Federal Reserve Bank of Atlanta has lowered its real gross domestic product growth forecast for 2017 to 0.5 percent, down from nearly 3.4 percent in February.

The euro zone reported final March consumer price index and trade data on Wednesday, but "data had little impact, as markets are focused on the first round of France's presidential election this Sunday," emerging market currency strategist Win Thin of Brown Brothers Harriman wrote in a note to clients.

"In what has basically become a 4-person race, the potential mix of the top two candidates will be key for the euro," Thin wrote.

In the U.S., investors are digesting weak economic data and the stock market is largely "trading on hopes for tax reform," wrote Peter Boockvar, chief market analyst at the Lindsey Group.

Rhino Trading Partners chief strategist Michael Block thinks concerns about economic data haven't entirely gone away, along with geopolitics and election risk.

"Neither has a mess of sentiment that has investors whipsawing themselves like it's … 2016. I'm old enough to remember 2016 and it was a frustrating year. Here we go again," he wrote on Wednesday.