US stocks near record highs despite “overwhelming uncertainty”

The US stock market rose last week, with the Dow Jones Industrial Average gaining 1.8 percent and the S&P 500 gaining 0.6 percent.

Over the course of the week, the S&P 500 briefly traded above its February closing high of 3,386.15 on Wednesday and Thursday, but was unable to hang on for a record.

Some analysts are concerned that the market rally may be unsustainable.

Rob Isbitts at Forbes noted that “despite the record run up in the S&P 500 and the DJIA from March’s panic low levels, most Dow stocks are still down this year”.

While Isbitts sees the possibility that some of the lagging stocks may start to catch up with the leaders, there is also a possibility that the “market moves from a fingers-crossed, Fed-liquidity-induced rally to a gradual erosion of the complacency and confidence that exists in some corners today”.

Paul La Monica at CNN suggested that the stock market rally could be turning into a bubble.

La Monica cited as evidence the S&P 500 and Nasdaq being near record highs, the plunge in VIX in the past month and “a crazy run this summer in speculative stocks”.

Meanwhile, James Montier, behavioral economist and member of GMO’s asset allocation team, wrote it in a recent research paper: “Never before have I seen a market so highly valued in the face of overwhelming uncertainty.”