With the S&P 500 index standing just 1 percent from its record high, many experts see a good chance that a drop is coming.
Greece's debt debacle and signs of weakness in housing are two major factors behind the concern.
"It’s anyone’s bet if the fear in the U.S. is a result of the latest fears about a Greek default or more general concerns that U.S. stock valuations are stretching credulity," writes John Kimelman of Barron's
. "It could be a combination of the two, with perhaps a few other reasons thrown in."
When it comes to valuations, the S&P 500 carried a trailing price-earnings ratio of 21.47 last Friday, up from 19.06 a year earlier, according to Birinyi Associates.
As for housing, money manager Barry Ritholtz questions the sector's strength.
"We are beginning to see signs that household formation is turning around," Ritholtz writes on Bloomberg
. "If that holds up, expect homeownership rates to stop falling, and perhaps even reverse.”
The homeownership rate has sunk to 63.7 percent, a 26-year low.
On the flip side of the coin, Jason Cummins, chief U.S. economist for European hedge fund titan Brevan Howard, says the Federal Reserve's pledge to continue moving very slowly in raising interest rates threatens to ignite the second real estate bubble in a decade.
"The risk [is] that the Federal Reserve will repeat its biggest mistake of the past decade," he writes in the Financial Times
U.S housing prices are rising 7 percent a year, averaging just 10 percent less than their peak level of 2006, Cummins notes.
"There are good macroeconomic reasons to stimulate aggregate demand through an interest-rate sensitive sector like housing," Cummins maintains. The economy contracted 0.7 percent in the first quarter.
"However, such a strategy is not without risks," he says. "
"To delay normalization of interest rates is to risk repeating the mistake of the last business cycle, which was to create a house price bubble that overburdened many households. And the bigger the housing bubble gets, the greater the risk of a crash once rates are normalized."
Economists don't expect the Fed to raise rates before September.
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