The Stock Market Keeps Rising. The Reasons to Be Hopeful Are Also the Reasons to…

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Yes, you can have too much of a good thing—and the stock market is starting to consider what that might mean for future gains.

You wouldn’t be able to tell just from looking at the market last week. The

Dow Jones Industrial Average,

after all, rose 310.16 points, or 1%, to 31,458.40, while the

S&P 500

advanced 1.2%, to 3934.83, and the

Nasdaq Composite

gained 1.7%. All three closed at record highs. What could be wrong with that?

Not much, apparently. The chance that a huge relief bill gets passed has risen so high that the market assumes it’s a done deal. Disappointing economic data, like weaker-than-expected jobless claims, continue to be dismissed. And optimism about our ability to vaccinate the U.S. population and end the pandemic appears to be rising.

But there is a sense of unease percolating, a sense that something is not quite right with markets. You can see it in the continued influence of retail trading, which found a new-old target in pot stocks, helping to drive shares of the

ETFMG Alternative Harvest

exchange-traded fund (ticker: MJ) up 42% through Wednesday and then down 26% through Friday’s close. It’s in the small-cap Russell 2000, which gained 2.5% on the week, to 2289.36, and has now outperformed the S&P 500 by 11 percentage points in 2021. And it’s there in the 10-year Treasury yield, which closed the week at 1.199%, its highest since March 2020. Do these things make sense? And if so, what do they mean for the overall market?

Part of the problem is simply the known unknowns. For instance, no one is quite sure when the economy will reopen and what it will look like. We can assume there’s pent-up demand, that workers in restaurants, retail, and other service-oriented business will have jobs to go back to, and people will want to fly to vacation destinations once again, but we won’t know for sure until it happens. “My base case is that it works out well,” says Drew Matus, chief market strategist at MetLife Investment Management. “It all boils down to the speed people feel comfortable re-engaging.”

There’s also starting to be some concern that maybe, just maybe, there may be too much stimulus coming down the pike. Details of a possible $1.9 trillion package are still being worked out, but President Joe Biden has already held a meeting…