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Investors increase their exuberance as S&P 500 sees best day since June

U.S. stocks jumped across the board on Monday and the S&P 500 had its best day since June 5, as the bulls stepped in and bought the dips in stock prices following last week's minor selloff.

Why it matters: While some have worried rising U.S. interest rates would dampen investor exuberance over the expected pickup in economic growth thanks to increasing vaccine numbers and big fiscal spending hopes, Monday showed investors still like risk assets. A lot.

Quick take: Though markets are showing steadily increasing inflation expectations, analysts seem to see only growth on the horizon.

What they're saying: “Investors ask whether the level of rates is becoming a threat to equity valuations. Our answer is an emphatic 'no,'" David Kostin, chief U.S. equity strategist at Goldman Sachs, said in a note to clients.

  • “Our bullish US equity view has already embedded expectations of rising interest rates.”

Details: All 11 S&P sectors closed higher Monday and the Dow and the Nasdaq had their best trading days since November.

  • Fewer than 40 stocks in the S&P 500 posted losses, and the number of stocks that finished in the green outnumbered those in the red by 4-to-1.

The big picture: "We expect the global cycle to move into an expansionary regime, with growth above its long-term trend and continuing to improve," Invesco senior portfolio manager Alessio de Longis said in a note to clients.

  • "Our leading economic indicators continue to improve across regions despite the meaningful increase in COVID-19 infections and more stringent restrictions on mobility in some parts of the world."

Invesco reiterated its overweight position in global equities, joining a growing line of investment firms who are dialing up their exposure to stocks and other risk plays like oil.

  • The $1.3 trillion asset manager also noted that it is shifting toward an overweight position in U.S. high yield, or junk bonds, as well as high-risk emerging markets debt while moving out of investment grade corporate credit and government bonds.

The bottom line: Economists are ratcheting up their growth expectations and fund managers are ratcheting up their expectations for stock market returns, despite signs of trouble on the horizon.

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