With the S&P 500 index having slipped 1 percent from its record high, some experts say the stock market is beginning to look wobbly.
So what could put an end to the six-year market rally that has seen the index triple?
"We think the bull market end-game is either inflation hurting bonds, EPS [earnings per share] recession wounding stocks or speculative excess," Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, said in a commentary obtained by MarketWatch
As for inflation, so far it is nowhere to be seen. Consumer prices slid 0.1 percent in the year through January.
When it comes to earnings, there is more room for concern. The 485 S&P 500 companies that had reported earnings as of Feb. 27, showed blended profit growth of just 3.7 percent, according to FactSet. And analysts predict profits will fall 4.9 percent in the current quarter, according to Bloomberg
"Our 2015 asset allocation of long U.S. dollar, long volatility and long stocks over bonds reflects our belief that global growth surprises on the upside this year and liquidity expectations peak," Hartnett wrote, according to the Financial Times
"It also captures the risk of speculative excess. We believe long Nikkei, short Treasurys is the purest 2015 macro expression of our current asset allocation. The U.S. dollar remains the roadblock for contrarians in commodities, energy and emerging markets."
In what might be a sign of speculative excess, the S&P 500 had a price-earnings ratio of 18.95 as of Feb. 27, up from 17.87 a year earlier, according to Birinyi Associates.
Given that valuation, many experts say markets overseas are more attractive. David Rosenberg, chief strategist at Gluskin Sheff, is one of them.
"In the U.S., the market overall is definitely richly priced with a 17-times forward price-to-earnings multiple," he wrote in the Financial Post
. "In terms of regions, parts of Asia and the euro area look quite compelling right now."
To be sure, Rosenberg isn't bearish on all U.S. stocks. "The sectors that offer the most upside are those that are not hit by the negative earnings impact from the strong greenback and also have earnings visibility at a time when the analysts are taking a knife to their earnings forecasts."
That includes technology, healthcare and, to a lesser extent, consumer cyclicals, he note.
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