After a strong start by global markets to the year, one question on the top of everybody's minds is how long the party will last.
During the past week, the Dow Jones Industrial Average posted gains in every session, closing above 25,000 points for the first time last Thursday, and continuing its rise the next day.
Meanwhile, both the S&P 500 and the Nasdaq Composite Index extended their record run to a fourth straight day last Friday.
It has been the strongest start to a year for all three major indexes since 2013, helped by a United States tax overhaul last month that includes hefty corporate tax cuts.
Indeed, investor euphoria spread across the globe last year. A measure of market performance, the MSCI All Country World Index, gained 22.7 per cent last year, closing at a record high.
"If there are any certainties, one will be that this party will eventually come to an end," market historian and InvesTech Research president James Stack told Bloomberg.
"A correction would be healthy. The longer we go without one, the greater the risk this will end badly. A lot of people will get hurt. And when it ends, it will end badly and with high volatility."
That does not mean the end is imminent, he added, and other analysts agree.
Mr Jerome L. Dodson, chief executive of Parnassus Investments, told Bloomberg: "Everybody thinks the market is overvalued. So do I. I'm expecting a correction, but I was expecting one after US President Donald Trump was elected. I was wrong. The market can keep going up even when it's overvalued."
All this might just bode well for the local market as it opens today for the first full trading week of the year.
Based on economic data this year, there is little reason to expect a slowdown yet. Strong numbers are coming out of the world's two largest economies - China and the US.
China's service sector expanded last month at its fastest pace in more than three years. A survey for the manufacturing sector showed similarly healthy growth.
In the US, the latest job report last Friday showed the economy adding 148,000 jobs last month, which was somewhat below expectations, but was counterbalanced by other indicators showing a strong economy.
Market psychology is also in play. Higher prices, as investor Sir John Templeton once said, are caused by higher prices. Yet, one should be aware the obverse is also true. When the trend reverses, there is no particular reason why markets can go lower, even if they look cheap. Lower prices will cause still-lower prices.
Sometimes, it pays to be a little bit contrarian. It is when nobody can see any reason that will bring the markets down - like now - that one should get a little bit worried.
THE BUSINESS TIMES, BLOOMBERG, REUTERS
