Inflationary pressures stemming from fiscal and trade policies in the United States have made it harder for policymakers to time their moves while raising the risk of miscalculation.
The warning came from former US Treasury secretary Jack Lew, who told a forum here yesterday that this is "not a time to put excessive confidence" on the continued rise of equity markets or overall global growth, but instead to focus on fundamentals.
While the global economy is still "in a sweet spot of low inflation and steady growth", there are many economic and geopolitical risks on the horizon as the business cycle enters its tail end, said Mr Lew, citing North Korea's uncertain commitment to nuclear talks and tensions between the US and its major trading partners.
As well as these uncertainties, there are pressures from US policies, he noted.
He said: "Spending your way into the end of an economic cycle is a dangerous business... It makes the correction, when it comes, a harder event to deal with."
Mr Lew likened the US' fiscal stimulus at a time of sustained growth and full employment to "pouring oil on a fire" - bringing short-term growth but with medium-and long-term consequences that could prove a drag on growth.
This could come in the form of higher interest rates, inflation and a growing fiscal imbalance. Tit-for-tat trade tariffs have also increased inflationary pressures.
Spending your way into the end of an economic cycle is a dangerous business... It makes the correction, when it comes, a harder event to deal with.
MR JACK LEW, former US Treasury secretary.
All this makes it harder for the US Federal Reserve to time its moves to tackle inflation while not cutting off the economic benefits of the current stimulus too early, said Mr Lew, who was speaking at the OCBC Global Treasury Economic and Business Forum.
He advises investors to "rely less on constantly rising markets" and make specific informed decisions about where to invest with a long-term view.
Another forum speaker, Mr Dennis Lockhart, former president and chief executive of the Federal Reserve Bank of Atlanta, said he did not expect a recession in the next three years, given the strong outlook for the US economy, nor does the Fed see one in the medium term.
He expects the Fed to be working towards an assumed neutral rate of 2.75 per cent to 3 per cent by late next year or early 2020, with four or five more rate increases to get there.
With rates already raised twice this year, a third hike can be expected in September and would be justified by the status of the economy, Mr Lockhart noted.
But as for the big question of whether a fourth one would come in December, he remained agnostic, noting that the Fed will likely "wait for the data to come in... and decide closer to the time".