The stock market, along with the Democrats, swept to new highs last week. The Dow-Jones industrial average rose to a record 554.85, owing partly to some investors' fears of bigger spending and more inflation under the Democratic Congress. But many an investor had other good reasons for buying stocks, such as rising corporate earnings and continued recovery of the U.S. economy.

The market got another push from the short supply of stocks; mutual funds and other long-term investors have bought so much stock that comparatively small orders push prices up. When waves of...

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