Reasons to worry: the S&P 500 is back above its dotcom bubble high today and just 1.4 per cent below its 2007 credit bubble high of 1,576.
This makes investors feel happy, and when they are happy they tend to buy more shares. In this sense equities are a Giffen good like a Rolls-Royce: the higher the price, the more people want them. Until, suddenly, they don’t.
For those who believe the market is truly efficient, rising shares merely reflect a changed reality, and the potential gains from here are just as good as at any other time. But the market is not truly efficient. Investors are growing complacent, which adds to the risk of a correction.
The market may well carry on up (one driver would be the combination of good news on the economy and further signs from the Fed that it will not tighten monetary policy), but the fact of its having risen should play no part in a decision to invest, momentum trading strategies aside. Watch yourself. The time to buy is when shares are cheap, not when they are expensive. Shares, particularly in the US, clearly offer less upside than they did a few months ago.
We now face a giant triple top in the markets, as this chart of the S&P 500 shows:
James Mackintosh is the Financial Times' Investment Editor, writing and presenting the daily Short View column and video. In 16 years at the FT his posts have included comment editor, motor industry editor and hedge funds correspondent, as well as spells in the Parliamentary lobby and Paris. He was the first reporter hired for FT.com, joining two weeks before it launched.
John Authers is the Financial Times' Senior Investment Columnist, writing the Saturday Long View and a regular Monday column. In a 22-year career at the FT, his previous posts have included global head of the Lex column, investment editor, US markets editor, Mexico City bureau chief and US banking correspondent. His latest book is The Fearful Rise of Markets. 