Good morning, Bull Sheeters.

Global stocks are climbing this morning, with autos, banks and retail in Europe leading the way—a sign that overseas investors are all-in on the reopen trade. Stateside, Nasdaq futures are gaining ahead of today’s data dump on U.S. retail sales.

Meanwhile, polling data on retail investors suggests this next round of stimulus checks will be a boon for Wall Street. Could this be the start of a stimmy rally?

In today’s essay, we look at bonds and bubbles.

But first, let’s see what else is moving markets.

Markets update

Asia

• The major Asia indexes are higher in afternoon trading, with Japan’s Nikkei up 0.5%.
• Beijing plans to get tough on Big Tech, “ordering regulators to step up oversight of Internet companies, crack down on monopolies, promote fair competition and prevent the disorderly expansion of capital,” Bloomberg reports.
• Asset management giant Vanguard Group is halting for now its solo push into mainland China, the Wall Street Journal reports, and instead may team up with fintech darling Ant Group.

Europe

• The European bourses were a touch higher out of the gates with the Stoxx Europe 600 up 0.4%, before gaining.
• The incident rate of thrombosis and/or pulmonary embolism for the 17 million people who’ve gotten the AstraZeneca vaccine so far is, by my calculation, 0.00000218%. That’s 37 cases out of more than 17 million people who’ve had the jab. As long-shot odds go, it’s not quite as remote as winning the Powerball lottery . . . but you get the picture. And yet, the EU is losing its prosciutto over this, pausing the AZ vaccine rollout country-by-country-by-country.
• Shares in Volkswagen were up 4.3% in early trading after the German carmaker unveiled a mega plan to build six gigafactories as it aims to gain an edge in Europe’s booming electric car market.

U.S.

• U.S. futures are mixed this morning—the Nasdaq is higher, the others are flat. That’s after all three exchanges closed higher yesterday, with tech and airline stocks—an odd couple, indeed—leading the way.
• Russell 2000 futures point lower, putting the small caps’ seven-game winning streak at risk. The index is up 19% YTD, and Morgan Stanley, for one, thinks the rally is due for a pause.
• The Federal Reserve kicks off its two-day meeting today. Fed Chair Jerome Powell will give a briefing tomorrow in which he’ll no doubt be hit with questions about interest rates and asset purchases, which could again influence movements in bond yields. The 10-year, meanwhile, sits at 1.6002%, pretty steady.

Elsewhere

• Gold is flat, trading below $1,730/ounce.
• The dollar is gaining again, frustrating dollar bears. Spoiler: the FX playbook this year so far is as follows—currencies of countries with successful vaccine rollouts outperform their peers. It’s that simple.
• Crude is down with Brent trading below $69/barrel.
• If Bitcoin were driving your car home from a party, the cops would have pulled it over a long time ago. It’s all over the place, down 4.3%, trading below $56,000.

***

Quite possibly the most ‘stupid’ investment

Treasury yields have been fairly steady over the past few days, which presumes some calm in the bond markets.

Still, investors are eager to hear how Jerome Powell and the Fed will address the bubble in the bond market. That’s not my assessment; it’s hedge fund king Ray Dalio’s.

Dalio, of Bridgewater Associates, published yesterday an interesting note detailing his research into the bond market. His conclusion: “The economics of investing in bonds…has become stupid.” (He actually has a problem with “most financial assets” priced in dollars, and has so for some time.)

The problem in the debt markets is that the world is overweight bonds, and yet the world keeps issuing more bonds to pay for things like the trillions in fiscal stimulus plans passed by the world’s biggest economies to climb out of their COVID hole.

Luckily, foreigners still like U.S. debt. According to Goldman Sachs, foreign inflows into long-term U.S. securities remain strong, with overseas investors buying $356.6 billion worth of American sovereign debt in December and January.

That’s speaks more to a quirk of the market than any real pent-up demand in the $75 trillion market for U.S. debt. Many pension funds and sovereign wealth funds are shopping for U.S. debt because it’s a less bad investment than, say, under-water German bunds.

So, that’s good. Right? America is issuing paper that the world wants.

Yes, but it also means that if the world is overweight bonds, it’s overweight U.S. bonds. And being overweight any asset is not a good investment strategy for the long-run. And, sure enough, the market is already seeing a shift from U.S. to Chinese bonds, because stable China is offering some decent returns for its debt. If U.S. debt loses its luster with investors in a big way, watch out. It will cause a major bubble in bonds that will push into the FX market, for starters, Dalio suggests.

So what does he suggest you invest in? For starters, anything but U.S. debt—that’s a memo that foreign investors have largely ignored.

He’s also down on the dollar. “I believe cash is and will continue to be trash,” he writes, “i.e., have returns that are significantly negative relative to inflation) so it pays to a) borrow cash rather than to hold it as an asset and b) buy higher-returning, non-debt investment assets.”

All that’s to say, stick with equities.

***

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's read

7 stocks to watch. As I noted above, Morgan Stanley thinks the small-cap rally is running a bit too hot. BofA Securities feels differently. It sees the markets at a mid-cycle inflection point, and that means small caps and value stocks are poised for further gains. As such, BofA strategists suggest these seven stocks to watch.

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Market candy

Quiz time

Which asset class is performing better so far in 2021? Tesla or airline stocks? The answer: airlines, by a wide margin. The S&P 500 Airlines Industry Index was up 35.9% YTD as of the Monday close. Elon Musk's EV maker, meanwhile, is up a whopping 0.32%.