Clouds may be gathering. Should investors be worried about a storm?

Let’s look at some factors that could trigger a market selloff in the weeks or months ahead.

(Note: I'm not saying a selloff is definitely going to happen—I want you to be prepared if it does.)

Factor #1: Stocks are trading near record highs

Stocks have posted multiple record closes, and the S&P has been trading well above its 200-day moving average. (1, 2) When stocks repeatedly push new highs, it’s not uncommon to see a pullback as traders take profits.

Factor #2: Investors are watching the Fed like hawks

Markets have been more volatile lately. What’s going on?

Let’s take a quick look at the factors that are influencing markets right now.

1. The bull market narrative has shifted

For months, investors have told a “Goldilocks” story of a strong economy, tamed inflation, and interest rates that were soon to drop. However, stronger-than-expected economic data and sticky inflation have now complicated the story, and investors have become wary.

What conclusions should we draw from a high-flying first quarter?

Investors are feeling optimistic about 2024.

With the S&P 500 closing its fifth straight month of gains, it's clear that the bull market has legs. (6)

We can also see that the rally is broadening beyond a small number of technology stocks as investors build confidence in the economy. (7)

Broader confidence in company growth potential is great news for investors as it makes the rally less vulnerable to the individual fortunes of a few high-flying stocks.