From Stocks to Bitcoin, Investors Bet the ‘Everything Rally’ Will Continue

The S&P 500 ended the year up 68% from its March lows, after losing more than one-third of its value in about a month. Government bond yields, which fall as prices rise, remain near all-time lows. Meanwhile, corporate bond yields also dropped after early-year turmoil. That means many bond investors ended the year with gains. And U.S. crude-oil prices are back near $50 a barrel after briefly dropping below $0 for the first time ever in April.

After the eye-popping rise during a global pandemic highlighted confidence that central banks and governments would prop up the world economy, many investors now expect the delivery of vaccines to buoy markets.

Gauges of sentiment from organizations including the American Association of Individual Investors show bearishness at multiyear lows. Meanwhile, tens of billions of dollars have recently plowed into exchange-traded and mutual funds that track stocks. Both of those trends have preceded past pullbacks, signaling excessive optimism to some cautious investors. Some are drawing parallels to the outsize gains late in 2017 and early 2018, before trade tensions and higher interest rates roiled markets.

“Investors can’t get enough risk—whatever it is,” said

Emily Roland,

co-chief investment strategist at John Hancock Investment Management. “Momentum is a powerful force, and we don’t want to fight it.”

The firm is maintaining its investment in U.S. stocks in line with the benchmark it tracks and favoring the economically sensitive industrial sector. At the same time, it is avoiding increasing its stockholdings and sticking with a neutral position in bonds.

Analysts still see potential speed bumps on the horizon, including a recent surge in coronavirus cases…