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The stock market is following a familiar pattern - it almost always ends the same way, says Wall Street analyst
Stocks are poised for a pullback of up to 12 percent after a storming start to the year, a Wall Street veteran has warned.
Global stocks hit record highs on Wednesday - ahead of a day off from trading for the Juneteenth holiday yesterday.
Surges in the S&P 500 and Nasdaq were driven by a rally in tech shares that has also made AI chipmaker Nvidia the world's most valuable company.
All round it is good news for investors, including the Americans whose retirement savings are largely invested in US indices.
But analysts are warning that shares won't keep going up - or at least they will need a 'correction' before they do.
Sam Stovall, CFRA Research's chief investment strategist, is warning of a stock market pullback
'I am getting increasingly concerned that we have to endure another decline of 5 percent or more before the year is out,' Sam Stovall, CFRA Research's chief investment strategist, told Yahoo.
He described the potential downturn as a 'resetting of the dials' or 'digestion' after a big meal.
The S&P 500 has surged by more than 10 percent in the first quarter - which Stoval said was the index's 11th-best first-quarter return since World War II.
But he pointed out that 14 of the top 15 returns were followed by a decline of at least 5 percent or more - with some slumps exceeding 12 per cent.
A 5 percent drop would lower the S&P from 5,487 points at Tuesday's close to about 5,212, matching its early March level.
A 12 percent decline would push the index to 4,828, where it was trading in January.
Stovall pointed out a 'silver lining' in that, after a strong first quarter, the S&P 500 tends to finish the year up by at least 20% on average.
That means any pullbacks act as breathers before the market marches on again.
Stovall, who served as S&P Global's chief investment strategist for 27 years before joining CFRA in 2016, also what can cause a pullback.
These tend to be unpredictable events such as a war or bank failure, markets rising too quickly and becoming overstretched - which many are arguing has happened this year - or fears of a recession.
A crash would also affect American's retirement accounts. Most have at least some of their 401(K) and Individual Retirement Account invested in the Dow Jones, the S&P 500 and the Nasdaq.
JPMorgan Chase CEO Jamie Dimon has said that he cannot rule out a 'hard landing' for the US
In recent weeks, top bankers and even a leading former CEO have issued chilling warnings about the US economy.
In May, Jamie Dimon - head of the world's biggest bank JPMorgan Chase - said that the worst outcome for the US economy would be 'stagflation'.
This is when inflation continues to go up, but unemployment is high and growth slows.
Economists consider stagflation, last seen in the US in the 1970s, to be worse than a recession. It would send stocks down, hitting 401(K)s and other retirement savings.