Wall Street is giddy these days. That should make you nervous.

Although my view remains that the stock market rally can sustain its strength over the long term, there’s a legitimate case to be made for a short-term pullback. You’ve heard of cautious optimism; think of my stance as cautious euphoria.

The bull market is intact. But at this stage of the game, an 8% to 10% drop can’t be ruled out. As you review your portfolio holdings, taking some profits off the table would be a prudent move. Book your gain on a particular position and let your initial investment ride.

For now, growth sectors of the stock market continue to lead the charge, despite recent inflation readings that have been hotter-than-expected. Information technology, communication services, and consumer discretionary have been the top performers within the S&P 500 index, as earnings results from those sectors beat expectations.

And yet, in an ominous sign, U.S. Treasury yields have simultaneously edged higher, with the 10-year yield hovering at 4.1% (see chart).

I think the recent euphoria on Wall Street is a “yellow light” that warns of a possible correction ahead.

Read This Story: Attention Stock Market Shoppers: Bargains Ahead

Valuations have gotten stretched, especially among the mega-cap tech “story stocks.” However, over the long term, the stock market appears to have sufficient fuel to keep rising for the duration of 2024, as economic and earnings growth continue to show surprising strength.

Corporate earnings have been particularly encouraging. Shares of Oracle (NYSE: ORCL) surged Tuesday by over 11% after the company reported earnings that beat expectations driven by strong growth within the company’s cloud services segment.

Across the Atlantic, European markets are mirroring these positive sentiments, buoyed by softer-than-expected employment data from the United Kingdom. This unexpected data bolsters the case for future interest rate cuts by the Bank of England later in the year.

Inflation: not dead yet…

U.S. headline CPI showed a notable uptick in the report released Tuesday, rising by 3.2% year-over-year in February, exceeding the previous month’s reading of 3.1% and consensus projections of a 3.1% increase.

This marks the second consecutive month of higher-than-anticipated CPI inflation, injecting uncertainty over the timing of future interest rate adjustments by the Federal Reserve.

Nonetheless, oddsmakers on Wall Street continue to place a roughly 70% probability of the Fed implementing its inaugural rate cut during its June meeting, a projection consistent with the previous week’s outlook.

Looking ahead, the focus will shift to retail sales and the producer price index (PPI), both scheduled for release on Thursday.

Projections suggest a 1.1% year-over-year increase in headline PPI, marking a slight uptick from January’s 0.9% reading. Excluding food and energy, PPI is anticipated to rise by 1.9% year-over-year, slightly lower than the previous month’s figure.

Additionally, Thursday’s data will unveil insights into consumer spending patterns with the release of February retail sales data. Expectations point towards a rebound in retail sales following a slowdown in January.

Headline retail sales are forecasted to increase by 0.7% month-over-month, following a 0.8% decline in January. Control group retail sales, excluding certain sectors, are expected to rise by 0.4% month-over-month after a contraction in January.

Resilient consumer spending witnessed over the past year has been a pivotal driver of U.S. economic resilience. However, I expect a moderation in consumer spending in the coming quarters, especially if labor market conditions ease from their current historically tight levels.

As investors digested all of these conflicting trends, the main U.S. stock market indices closed mixed on Wednesday as follows:

• DJIA: +0.10%
• S&P 500: -0.19%
• NASDAQ: -0.54%
• Russell 2000: +0.30%

I expect the cryptocurrency market to continue its winning ways in 2024, as the bull market in Bitcoin (BTC) and other crypto assets forges ahead.

The gap between traditional and digital markets is narrowing, as Bitcoin exchange-traded funds (ETFs) report massive inflows of new capital.

It’s clear that every portfolio should have exposure to crypto. However, you need to be informed, to make the right choices. Pick the right crypto asset and you can reap huge gains in a short amount of time. Pick the wrong one, and you can lose your shirt.

The good news is, in our coverage of the crypto market, we separate fact from myth, the wheat from the chaff. Start receiving our FREE e-letter, Crypto Investing Daily. Click here now!

John Persinos is the editorial director of Investing Daily.

To subscribe to John’s video channel, click this icon: