Human beings love round numbers. For investors, it’s a risky way of thinking.

Back when I was applying to college, some of my fellow students would retake the SAT because their first scores fell just shy of round numbers. In Major League Baseball, a .299 hitter will start swinging wildly during the final games of the season, desperate to hit .300. A used car with an odometer at, say 99,500, will see its value fall exponentially once the mileage hits 100,000.

In all such cases, the substantive differences are negligible. But social research shows that our brains are hard-wired to give disproportionate meaning to zeroes. It stems from our base-10 number system, an anthropomorphic decision that derives from the number of digits on our hands.

The same mental bias affects investing. Big, round numbers can cloud your judgement, tempting you to buy or sell at the wrong times.

Wall Street got excited this month when the Dow Jones Industrial Average and the S&P 500 hit record highs by surpassing 27,000 and 3,000, respectively, for the first time. The tech-heavy Nasdaq has been flirting with record highs as well; the index surpassed the round number of 8,000 last year.

The Dow (made up of 30 components, a nice round number) gets the most attention as a proxy for the stock market. Regardless, the financial media’s cheerleading for market milestones is a waste of print and pixels, devoid of real investment meaning.

If anything, it’s a classic contrarian indicator. When you start to see giddy brokers on the floor of the stock exchange sporting “Dow 27,000” and “S&P 3,000” baseball caps, it’s time to elevate the cash levels in your portfolio.

Market index levels can represent interesting historical benchmarks, but whether the Dow sits at 26,890 or 27,000, or the S&P 500 at 2,980 instead of 3,000, has no bearing on how those indices will move in the future.

The same applies to individual equities. Perhaps you’ve heard yourself say something along the lines of: “I’m waiting for this stock to get back to $50.”

Round numbers just give the nitwits on cable news something to yap about. The well-coiffed “reporters” on CNBC cover Wall Street as if it were a football game.

So why is your shopping cart at the store full of so many products with prices that end in .97 or .99? This pricing practice exploits the same bias in your brain, but in a different way. The round number is perceived as being much more expensive; the lower fraction is perceived to be a greater bargain than it really is.

Here’s some perspective. I was covering the financial markets when the Dow first crossed the 10,000 level in March 1999, to considerable hoopla. I distinctly remember CNBC running breathless special reports, such as: “Countdown to Dow 10,000.”

In the following years, the Dow dipped above and below that level several times. In 2002, for example, the Dow lost 16.7% of its value, falling from 10,021.60 to 8,341.63, amid the aftershocks of the dot.com bust.

Last Friday, the Dow closed at 27,154.20, the S&P 500 at 2,976.61, and the Nasdaq at 8,146.49. Not one of these indices is destined to stay at such lofty levels for long.

A bubble about to pop?

A quick summary of the dangers: The aging bull market is the longest in history and stocks as a whole are overvalued. The economic recovery is in its tenth year and recoveries historically only last about eight years. The Federal Reserve is unlikely to significantly loosen the monetary spigot, contrary to President Trump’s personal lobbying.

The trade war shows no signs of ending and it’s already taking a toll on business sentiment and corporate margins. And second-quarter earnings are forecast to post negative growth, although they’ll probably come in at least a tad better than currently expected.

Indeed, U.S. stocks finished lower last week amid mixed second-quarter corporate earnings results. Financial services was the first sector to come out of the gate and the results were mostly positive but with important caveats.

Earnings from the big banks mostly beat expectations, driven by a confident consumer and robust loan growth, but declining net interest margins raised concerns for the future.

Read This Story: Bank Earnings: The Rubber Hits the Road

This week, several bellwether industrial firms are scheduled to release corporate report cards, which should provide clues as to the strength of manufacturing and the overall economy.

The docket this week also is crowded with important economic reports that have the potential to move the markets. As the trade war persists and economic reports paint a mixed picture, investors will keep a nervous eye on the hard data (see table).

To be sure, the stock market has risen over the long haul. As it hovers above 27,000, the Dow’s year-to-date return exceeds 17%. Over the past three years, the gain has been 60%. But it’s not because of arbitrary numerical goals.

A growing global economy, thriving international free trade, rising corporate earnings, and low interest rates have provided the foundation for the upward momentum in stocks. Each one of those bullish pillars is currently under serious threat.

Investors have been pinning considerable hopes on another interest rate cut at the next meeting of the Fed’s policy-making Federal Open Market Committee (FOMC) on July 30-31. I’ve been warning my readers that Wall Street is setting itself up for disappointment.

Read This Story: Will The Fed Play Santa in July?

President Trump has been twisting the arm of Federal Reserve Chair Jerome Powell to slash rates, but Powell has pointedly asserted his independence. Economic conditions simply don’t warrant substantial easing. However, interest rate cuts are baked into equity prices, making it more likely that the market will fall if the Fed doesn’t deliver.

Investor hopes already are getting dashed. The three main U.S. stock indices started last Friday sharply in the green but eventually closed in the red, as speculation increased that the Fed would cut rates by only 25 basis points, or perhaps not at all, rather than cut rates by the 50 basis points that Wall Street had expected.

Stay cautious. As the markets hover at big round numbers, they become all the more vulnerable to wild volatility and steep sell-offs.

Questions or comments? I’m here to help: mailbag@investingdaily.com

John Persinos is the managing editor of Investing Daily.