Investors are cautious about the U.S. stock market’s record rally, with experts warning of a potential pullback. The S&P 500 is up 8% this year, nearing all-time highs, while the Nasdaq Composite hit a record. Market strategists predict a pullback as valuations are historically expensive, especially with inflation data due Tuesday.

The S&P 500 has surged 28% since April, fueled by easing tariff fears. Trading at over 22 times earnings estimates, the index is at its highest valuation in over four years. Investors are wary of August and September, historically the worst months for the S&P 500. Despite concerns, some remain bullish on the market.

Market bets on Fed rate cuts are high after weak jobs data, with a 90% chance of a cut in September. However, rising inflation could make the Fed hesitant. Higher tariffs are a concern, with new levies on imports and potential increases on Chinese goods. The impact of tariffs on the economy remains uncertain, with some investors wary of underestimating their negative effects.

Read more at Yahoo Finance: Inflation data to test stocks as some investors brace for rally to pause