Stocks Hit Record Highs As An Extra $1 Trillion In Stimulus May Come “Fairly Soon”

This week, US stock benchmarks broke through record highs as Democrats took control of the Senate. The S&P 500 budged 1.3% for the week. The Dow—1.4%. Nasdaq’s NDAQ tech stocks popped 3%. Meanwhile, the little ones under the Russell 2000 jumped a strong 6%.

The strongest theme driving stocks (especially small caps) is a spending spree that the “blue wave” is set to unleash. The economy is still like a toddler on a bike with training (ahem, stimulus) wheels. And now that Democrats hold a thin majority in Congress, Wall Street is banking on, well, even sturdier training wheels.

Matthew Luzzetti, chief US economist at Deutsche Bank, thinks an extra $750 billion to $1 trillion in stimulus aid may be in store. Renowned economist David Rosenberg expects a trillion-dollar package from Democrats “fairly soon.” He believes this extra aid may drive GDP growth to 7% this quarter.

Another positive for certain stocks is that a Democrat-led Congress will help Biden push his bold agenda—with a historic $2 trillion climate plan at the forefront. After the “blue sweep” victory, investors piled into sectors that should do well out of Biden’s progressive policies.

The biggest winners this week are green energy, lithium, cannabis sectors—as well as energy as part of the “recovery” play. Here’s a table with some of the top performing sector ETFs this week:

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The boldest Wall Street calls this week

JP Morgan said Bitcoin could hit $146,000 in the long run because Wall Street is warming up to cryptos. (Read my in-depth explanation here.) “A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term,” wrote JPMorgan Chase strategists in a note.

Barclays crowned Starbucks SBUX (SBUX) as a top pick for 2021 saying it’s a “best in class” digital platform. “It’s a premier, large-cap, high-growth, global consumer company, with a dominant U.S. retail and consumer product platform, significant international growth led by China, and a best-in-class digital platform…. For long-term investors, few other names offer proven, industry-leading growth at scale,” Barclays analysts wrote in a note.

RBC Capital Markets gets a nomination for “the biggest change of heart” of the year. After a FOMO-inducing 1,200% rally, the fund upgraded Tesla stock (TSLA TSLA ) from a low $300 to $700. “There is no graceful way to put this other than to say we got TSLA’s stock completely wrong,” analyst Joseph Spak wrote in a report lifting Tesla’s target.

UBS named Nike NKE (NKE) a top pick for 2021 as the world’s dominant sports company turns into an e-commerce giant. “Nike’s digital transformation is just getting started and this is a point the market likely doesn’t fully appreciate.” UBS analysts wrote in an internal report lifting the stock’s price target to $180.

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