The stock market keeps rising. Reasons for optimism are also causes for concern.

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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 business average,

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

S&P 500

improved 1.2%, to 3934.83, and the

Nasdaq Composite

received 1.7%. All three closed at the highest levels. What could be wrong with that?

Not much, apparently. The chances of getting a big aid bill over have skyrocketed that the market accepts that it is a good deal. Economic data, such as weaker-than-expected jobless claims, is still being erased. And hope about our ability to vaccinate the U.S. population and end the pandemic seems to be rising.

But a sense of dissatisfaction is pressing, a sense that something is not entirely right with markets. You can see it in the ongoing impact of retail trading, finding a new target in pot stocks, helping to manage segments of the

Another ETFMG Harvest

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

Part of the problem is just the unknown. For example, no – one is quite sure when the economy will reopen and what it will look like. We can assume that there is a high demand, that staff in restaurants, retail and other service-oriented businesses will have jobs, and that people will want to go to holiday destinations again , but we will not know for sure until it happens. “My core issue is that it works out well,” says Drew Matus, chief marketing strategist at MetLife Investment Management. “It drops to a point where people feel comfortable re-engaging. ”

There are also a few concerns that could, just probably, cause too much stimulus to come down the pike. Information on a possible $ 1.9 trillion package is still being worked out, but President Joe Biden has held a meeting with senators to discuss an infrastructure plan, which could potentially be trillion or more. add more. That has created concerns about higher taxes to pay for the plan, as well as an even higher yield, to reflect the potential for stronger growth – and what they would mean for a market that is like -that show froth signs.

“The biggest concern was about higher tax / regulatory stocks and then higher inflation / rates, although the duration and severity of the pandemic remained a focus,” wrote Oscar Sloterbeck at Evercore ISI about the company’s scrutiny of investors.

For now, however, the steady gains in bond yields have been good for the market, according to Ned Davis Research strategist Tim Hayes. He notes that the correlation between the yield on Barregys Global Aggregate Bond index and global stocks is currently at 0.24 – a correlation of 1 means that two assets are moving in the gray phase – and it has been very stable since the market became stable after the onset of coronavirus. If the correlation turns negative, which would cause stocks and bonds to move in other directions, it could be bad news for equities.

“If the correlation returned to reversal, it would tell us that the markets had begun to see rising output as a threat to economic growth, and then corporate profits,” Hayes writes.

For now, however, we will continue to enjoy the gifts we keep giving.

Write to Ben Levisohn at [email protected]