'Foolish to stand in the way': Fed support and the day-trading boom will drive stocks higher, an analyst says

• Stocks will rise because the Federal Reserve and the day-trading boom are driving up prices, the Bianco Research chief James Bianco told CNBC's "Fast Money" on Tuesday.
• The Fed's decision to buy individual corporate bonds has put a "massive floor on this market," Bianco said.
• David "Davey Day Trader" Portnoy and his "retail bros" are piling into stocks because they're confident the Fed will shore up prices, making it tough to be bearish right now, Bianco said.
• "You have to find something that says it's going to be so powerful to bring the market down that even the Fed's unlimited printing and the Davey Day Trader crowd buying like mad is not going to be able to stop it," he said.
• Visit Business Insider's homepage for more stories.

Stocks will climb higher because the Federal Reserve is shoring up prices and day traders are buying without fear, James Bianco, the president of Bianco Research, said on CNBC's "Fast Money" on Tuesday.

The US central bank's unprecedented interventions — which now include plowing up to $250 billion into individual corporate bonds — have "put a massive floor on this market," the investment analyst said.

That safety net, combined with easy access to zero-commission and fractional trading across multiple platforms, has sparked a surge in retail investing, Bianco said. Notably, the Barstool Sports founder David Portnoy, who goes by the nickname Davey Day Trader, now captains an "army" of day traders, or "retail bros."

"When you talk to them or read the Reddit boards, the word 'Fed' always comes up — that they are not going to allow the market to go down," Bianco said.

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

The combined forces of Fed Chair Jay Powell and Portnoy's trader platoons make it difficult to justify a bearish stance, Bianco continued.

"You have to find something that says it's going to be so powerful to bring the market down that even the Fed's unlimited printing and the Davey Day Trader crowd buying like mad is not going to be able to stop it, it's still going to fall," he said. "That's a high hurdle."

However, Bianco cautioned that stocks were already overvalued and that "there will be a reckoning somewhere down the line," for instance, if the economy reopens but fails to bounce back.

Read more: Schwab's global investing chief says the market's best-performing stocks are due for a surprising rotation for the first time in 12 years — and shares 3 ways to get ahead of the shift

Bianco made similar comments on CNBC's "Trading Nation" on Tuesday.

"This is a market that's destined to go higher," he said, adding that "we could have new highs before the end of the year."

Bianco, who moved entirely to cash in early March in response to the coronavirus threat, rationalized his shift from bear to bull.

"I did not appreciate what the Fed's actions to support the market were going to do to the retail community," he said.

Read more: Main Street traders have been crushing Wall Street in recent months. Goldman Sachs breaks down what retail investors should buy to keep winning — and lists the 12 stocks leading the charge.

"There's been a massive flood of money" from retail investors, he said, because they believe that markets "always go up, you can't lose, the Fed is there."

The retail inflows show few signs of stopping and threaten to inflate an already overvalued market, Bianco added. The frenzy could be halted by a second wave of coronavirus infections, a sluggish economic recovery, or a change in the Fed's behavior, he said.

But for now, he said, "I think it's foolish to stand in the way of it."

Read more: Famed short-seller Andrew Left lays out his methodology for finding the stock market's weakest links — and says he's terrified of newbie day traders that think they can outsmart Carl Icahn and Warren Buffett