Stocks Shine Now, But Cracks Are Starting to Show

Stocks at Record Highs Face Risks from Slowing Economy and Fading AI Momentum

Wall Street posted a bullish trifecta on Thursday, with the Dow +1.36%, S&P 500 +0.85%, and Nasdaq +0.72% all closing at fresh record highs. But as history shows, peaks are often followed by painful pullbacks.

Peter Berezin, chief global strategist at BCA Research, warns that sell-offs rarely have a single cause. “To ask what will trigger the next stock market crash is akin to asking which snowflake will trigger the avalanche,” he says. Instead, downturns tend to emerge when multiple pressures converge.

• In 1987, Black Monday followed a rising trade deficit, a falling dollar, surging yields, and new tax legislation.
• In 1998, the collapse of LTCM combined with Asia’s financial turmoil and Russia’s debt default.
• The dot-com bust wasn’t just about overvaluation — Fed hikes and a flood of new stock issuance also played a role.
• In 2022, stocks slid despite warning signs a year earlier, as inflation and aggressive Fed tightening finally caught up.

The takeaway: markets can stay buoyant even in the face of risks, but once cracks spread, sentiment shifts quickly.

Looking ahead, Berezin warns that today’s bull market pillars — economic resilience and AI enthusiasm — are showing strain.

• Labor market: Rising hidden unemployment suggests underlying weakness.
• Housing market: Growing signs of instability.
• AI trade: While still a long-term growth story, hyperscalers like Amazon, Google, Meta, Microsoft, and Oracle are exposed to slowing ad revenues and declining free cash flow. AI-related stocks, now a third of the S&P 500, could stumble well before capex peaks in 2026.

If equity wealth falls, consumer spending may weaken further, amplifying the downturn.

“While it’s impossible to know exactly when equities will peak, enough vulnerabilities have built up to justify keeping one hand near the eject button,” Berezin concludes.