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The S&P500 has gone over 1,000 days without a 10% drop, the third longest stretch in the past 25 years. Since October 2011, when the S&P500 was wrapping up a five-month, 19% decline, the stock index has rallied 80% without a 10% correction getting in the way. While that uninterrupted strength in the stock market is not, in and of itself, enough to cause a correction in stock prices, it does point out that we have entered into a period of higher risk for stocks in general. Such an uninterrupted gain is not without precedent, it happened for just under 7 years in the 1990’s and 4.5 years in the last decade, as shown in the chart below. However, in both of those prior cases the ending was quite ugly as both periods preceded major bear markets. While we don’t currently see the typical economic and interest rate signals that we see near the end of a bull market, we do see many indicators that suggest stock prices are ‘ahead’ of the near-term fundamentals supporting them, and that some of those ‘supports’ could quickly turn into headwinds instead of tailwinds! (more…)