Bigger stimulus? Here’s why now may be seen as the ‘peak of this bubble,’ warns strategist

Helping fuel Friday’s gains is a report that Biden is considering a two-prong COVID-19 stimulus plan — $1,400 payments to Americans, adding to the $600 already agreed, followed by a $3 trillion tax and infrastructure plan.

That brings us to our call of the day, from JonesTrading’s chief market strategist Mike O’Rourke, who warns we may have reached a tipping point for all that investor enthusiasm.

“The expectation of $2,000 stimulus checks as part of an additional $1 trillion fiscal stimulus from the Biden administration has only fueled the incredibly exuberant animal spirits in the financial markets. Don’t be surprised if this latest (and what should be the last) bout of fiscal stimulus marks the peak of this bubble,” O’Rourke said in a note to clients.

“These developments are responsible for sending U.S. equities to new all-time highs the past couple of days including a 6% rally in the Russell 2000 RUT, +1.89%. Fears about the printing and spending have sent bitcoin 17% higher over the past two days,” he added.

Bitcoin BTCUSD, +4.42% on Friday moved above $41,00 and Thursday’s record. Those gains come as the dollar DXY, +0.07% has also climbed, meaning cryptocurrency investors may not be protecting themselves from a dollar drop, said O’Rourke. They are “simply paying twice as much for an ‘asset’ than they were at Thanksgiving,” he said.

And Bank of America’s chief investment strategist Michael Hartnett told clients in a note on Friday to “sell the vaccine” news. That is as he noted “violent inflationary price action” over the last two months for assets like bitcoin.

Bubble warnings have also been heard this week from Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co.

But some have been going the other way. Credit Suisse’s U.S. equity strategist Jonathan Golub lifted his S&P 500 SPX, +1.48% year-end target to 4,200, from 4,050, partly on hopes for a stronger economic reopening as Democrats gain power in Washington.  

The markets

Stock futures YM00, +0.32% ES00, +0.33% NQ00, +0.55% are rising, a day after the Dow industrials DJIA, +0.69% closed above 31,000. European stocks SXXP, +0.61% are mostly up, and Asian markets had a mixed day.

The buzz

December U.S. jobs data are ahead, with a slim gain of 50,000 expected, though some economists warn that may be optimistic amid the COVID-19 pandemic fallout.

The COVID-19 vaccine from U.S. drug company Pfizer PFE, +0.52% and its German partner BioNTech BNTX, +2.78% appears to protect against the new highly contagious U.K. and South African variants, says new research.

Amid calls for his ouster, President Donald Trump condemned Wednesday’s violence by a mob of his supporters, as he returned to Twitter TWTR, -1.75% for the first time since a 12-hour ban. The violence has left five people dead, including a U.S. Capitol Police officer, and that department’s chief has now resigned. Meanwhile, education secretary Betsy DeVos became the second member of the Trump administration to quit in the wake of the riots.

Shares of Hyundai Motor 005380, +19.42% surged 20% in Seoul after the South Korean automobile maker confirmed talks with technology giant Apple AAPL, +3.41% to create a self-driving electric car. The Korean Kospi 180721, +3.97% gained nearly 4%. One analyst says Apple could reach deals with other partners, even electric-car maker Tesla TSLA, +7.94%.

Shares of Micron MU, +2.59% are rising after the memory-chip maker’s earnings confirmed the industry has turned a corner.

Boeing BA, +0.80% will pay more than $2.5 billion in penalties to settle charges that it misled U.S. aviation authorities over its 737 Max aircraft.

Chinese officials have locked down the capital of North China’s Hebei province, a city of 11 million, in a bid to stop a fresh COVID-19 outbreak.

Random reads

2020 competes with 2016 for warmest year ever.

Identical twins aren’t so identical after all.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.