S&P 500 rally pace raises overheating concerns

The S&P 500 rose more than 16% across April and May, a pace that Deutsche Bank Research says has happened only a few times since World War II. In most of those earlier cases, the gains followed major economic shocks such as the Covid19 pandemic or the global financial crisis. What stands out this time is that the rally is occurring outside a recession recovery. Deutsche Bank strategist Henry Allen noted that the speed of the advance resembles the months before the 1987 market crash, which has made some investors more cautious. Analysts say recent enthusiasm around artificial intelligence has helped drive the market higher, especially among large technology and semiconductor companies. At the same time, concerns remain about Federal Reserve policy, tight credit conditions, consumer savings levels, and possible changes in oil prices. Some market strategists now warn that conditions may be becoming stretched and that a pullback risk is building.