Stocks have been setting records faster than we can keep track — but how long can this streak last? Despite September’s reputation for dragging down the stock market, 2024 has been exceptional, with extraordinary gains. The S&P 500 has already outperformed Wall Street’s expectations for the year by 20% — driven by the Federal Reserve’s lower interest rates, excitement around AI, and strong corporate earnings. The reduced risk of a recession adds to the optimism, giving investors hope for further gains.

• Over the past year, the S&P 500 has returned three times its average annual return since 1926 — while US stock market valuations have reached levels similar to the late ‘90s pre-bubble era.
• In the last 12 months, general US domestic stock funds have risen by 29%, while utility funds and international stocks gained 38.3% and 24.3%, respectively.

Don’t start counting your eggs: As the old saying goes, what goes up must come down. Analysts at Yardeni Research have raised a red flag, noting that “the risk of a melt-up has increased.” This suggests that the stock market may be rising too quickly due to excessive enthusiasm, potentially leading to a rapid and sharp drop if this trend reverses. They cautioned that if market gains continue at an unsustainable pace, the eventual correction could resemble the severe downturns seen during the 2000 bubble burst.