Financial website MarketWatch reported that the U.S. stock market started the year with a remarkable performance, and the rally continued even as the outbreak of Newcastle pneumonia (a Chinese communist virus) spread and protesters seized the Capitol in a bloodbath, reflecting the market’s expectation that the Democrats would take control of the White House and Congress would be able to raise fiscal stimulus in a big way once they were in full power, and that the slight lead in both houses of Congress would limit Biden’s room to push for tax increases.
But in an atmosphere of high-octane optimism, JonesTrading chief market strategist Mike O’Rourke warned that the trend of U.S. stocks may have reached a turning point at this moment.
In a research note to clients, O’Rourke said, “The market is looking to the Biden administration to provide an additional $1 trillion in fiscal stimulus, including a $2,000 stimulus check per person, to fuel the incredibly hot animal instincts in the financial markets. Don’t be surprised if this (supposedly final) round of fiscal stimulus marks the end of this bubble’s expansion to the breaking point.
These developments,” he continued, “have vaulted U.S. stocks to unprecedented new highs in the past two days, including a 6% jump in the Russell 2000 stock index. Frenzied money printing and big spending concerns, on the other hand, pushed the price of bitcoin up 17% in the last two days.
Bitcoin rose above $41,000 on the 8th, breaking the all-time record set just on the 7th. At the same time, the DXY dollar index also climbed, which O’Rourke noted means crypto investors may not be hedging against a weakening dollar and are “literally paying twice as much as they did at Thanksgiving to buy this ‘asset.
Michael Hartnett, chief investment strategist at Bank of America (BofA), also advised clients in the report to “sell when the good vaccine news comes out. He mentioned that over the past two months, asset markets like bitcoin have surged, reflecting the “fierce inflationary sentiment.
There have been warnings about the U.S. stock “bubble” this week, such as from Jeremy Grantham, co-founder and chief investment strategist at Boston fund firm Grantham, Mayo, Van Otterloo & Co. But there are also a lot of analysts who see the market in a different light.
Credit Suisse U.S. equity strategist Jonathan Golub raised his year-end target for the S&P 500 from 4,050 points to 4,200 points, citing a full Democratic administration that is expected to drive a stronger economic recovery.
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