U.S. Stocks Edge Higher in Late Trading on Biden Aid Proposal

(Bloomberg) -- Proxies for U.S. equities pushed higher as investors assessed the details of President-elect Joe Biden’s $1.9 billion spending-bill proposal that includes $350 billion in aid to states.

The biggest exchange-traded fund that tracks the S&P 500, ticker SPY, was up almost 0.1% as of 5:17 p.m. in New York. The underlying index lost 0.4% in the cash session, with investors growing concerned about the path for Federal Reserve policy now that signs of faster inflation are emerging.

The Fed’s largesse and prior federal spending packages worth almost $3 trillion have powered a 70% gain in U.S. stocks from the pandemic lows in March. Biden’s plan -- long telegraphed since his election in November -- is more than double the package approved in late December, and proposes sending $1,400 to qualified individuals. It also calls for increasing the minimum wage to $15 an hour.

“Biden coming into office is what’s on everyone’s mind. What that means long term is more stimulus, more money in the market and a tailwind for the equity markets,” said Brian Walsh, Jr., senior financial adviser at Walsh & Nicholson Financial Group.

U.S. stocks have pushed to record after record since the vaccine approvals and Biden’s election in November. His agenda, including ambitious aid and a follow-up plan to spend on projects such as infrastructure, got a boost Jan. 5 when Democrats won control of the Senate.

With the stock records have come valuations stretched to levels not seen in two decades, prompting warnings of a bubble that will lead to a rapid selloff. Investors have tolerated them so far because of Biden’s pledge to amp up spending not only on direct aid, but also on fighting the virus and rolling vaccines. His bill sets aside $20 billion for a national vaccine program and $50 billion to expand testing capacity.

Signs of froth abound, though. In a note titled “This Is Ludicrous,” Bespoke Investment Group summed up the recent action. It cited 59 U.S.-listed stocks that are trading at prices that are more than 10 times sales and have more than doubled in the past three months. Stocks currently in that category have risen 760% since March and have a combined market capitalization of $320 billion, according to George Pearkes, global macro strategist at the firm.