In its latest note, Sevens Research Report assessed what could interrupt the rally after the S&P 500 hit a new all-time high and finally took the 5,000 level last week.
Rather than ask why stocks keep rallying, the firm believes investors should be asking why they wouldn't keep rallying after last week's news and data reinforced the four drivers of this bull market: Fed rate cuts by May, solid economic growth (and no signs of a hard landing), continued disinflation and strong earnings.
The burden of proof lies squarely with the bears and so far, the economic data and Fed speak hasn't done enough to disprove any of those four bullish factors," wrote the firm.
However, Sevens Research said the reality is there are still a number of risks emerging that need to be watched, and amidst 5k euphoria, they think that needs to be pointed out.
"Yes, data has pointed to a sweet spot for growth, inflation and the Fed. But that won't last forever and there will be bad news for this market, there always is," they added.
The firm notes that the risks that have quietly grown in the background during the rally are the chances of rate cut disappointment, the growing list of layoffs, commercial real estate, and valuations.
"Bottom line, it's important to acknowledge that this rally has been driven by actual good news and bullish expectations being reinforced by actual data. At the same time, the risks that kept investors worried in October (and even throughout 2023) haven't been vanquished—they simply haven't shown up, yet," concluded Sevens.