The Big Picture: Bull Market Signposts: What Happens Before S&P 500 Peaks?

Markets often climb on a wall of worry. Because bull markets tend to start during times of heavy pessimism, many investors miss the early part of a rally. As stocks continue to rise, fears of a big drop keep investors out.

It’s only during the manic peak that investors tend to once again get all-in. And that’s the worst possible time to invest. That’s why understanding signs of a peaking market are crucial for investors to monitor.

What should investors look for? One sign is sentiment. Today’s investors are somewhat wary about today’s stock market. Especially since the recent rally has been driven by just a few tech stocks.

That’s reminiscent of the 1990s tech bubble. However, it’s only when investors have thrown caution to the wind that it’s time to be wary.

The other factor is valuation. Market valuations are slightly above average. And some tech stocks are trading at extremes.

But market darling Nvidia (NVDA), despite its massive gains, isn’t overpriced. In fact, its share price rally has been less than its earnings growth over the past two years.

If anything, the likelihood of a major market decline soon is low. However, even in a long-term uptrend, some occasional setbacks and soaring volatility can and will happen.

To read the full analysis on market peaking trends, click here.