The Market Has Been Fabulous, Maybe Excessively So

You may not realize how great the stock market has been. But, our columnist says, it can’t keep rising at this pace for long.

September is typically a dicey month for the stock market. In many years, so are the weeks before a contentious election.

But the returns that millions of investors have been seeing lately have been wonderful — far better than Wall Street projected at the end of last year.

The S&P 500 is already 20 percent higher than the Wall Street consensus for all of 2024. As a consequence, Wall Street has upgraded its outlook radically: Now that stocks have been rallying, why shouldn’t they rise further?

It’s not crazy to think this way, even in the midst of wars, catastrophic storms and vituperative political battles. Stock market momentum, in itself, is a powerful thing. When the market is rising, it often keeps going. And important factors are propitious for stocks: The Federal Reserve has made life easier for companies and investors by lowering interest rates, those companies are still churning out handsome earnings and there is no economic recession visible on the horizon.

But at some point, the tide always turns. While market meltdowns are what most people worry about, some strategists are nervous that stocks are rising too rapidly. “The risk of a melt-up has increased,” Yardeni Research, an independent financial research firm, warned clients in a note last month. Translation: The market is in danger of getting carried away.

“The question is whether exuberance is quickly turning from the rational variety to the 1990s irrational version,” Yardeni Research said. Irrational exuberance about the prospects for technology stocks in the late 1990s created a disastrous bubble, which burst in March 2000, and it took years to recover. The S&P 500 had negative returns for the next decade.