Is Everybody (Too) Happy?

Everybody in the stock market (at least everybody with long positions, which includes most investors) has been happy since the S&P 500 bottomed on October 27—until it stumbled a bit today. The market was up in the morning despite a dive by FedEx shares. But stock prices tumbled during a late afternoon selloff. Most pundits concluded that the market was overbought and due for a correction. We agree, which is why we haven't raised our long-standing year-end target of 4600.

Was there a fundamental trigger for the selloff? The only one we can point to is mounting evidence that the Gaza war is turning into a more regional one. We remain concerned about that possibility. On Tuesday, US Secretary of Defense Lloyd Austin, on a visit this week to Bahrain, home of the US Navy's headquarters in the Middle East, said Bahrain, Britain, Canada, France, Italy, the Netherlands, Norway, Seychelles, and Spain were among nations involved in the Red Sea security operation to protect ships transiting the Red Sea that have come under attack by drones and ballistic missiles fired from Houthi-controlled areas of Yemen. The Houthis are backed by Iran.