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Date: FactSet; Chart: Axios Visuals

Bad news has been bouncing off the Teflon-like stock market over the past nine months — making selloffs like Tuesday’s appear to more and more investors like buying opportunities.

Why it matters: The S&P 500 closed at 4,479.71 on Monday, marking a 100% gain from its March 23, 2020 closing low of 2,237.40. But at some point, there could be enough bad news about the economic backdrop that stock prices fall sharply.

State of play: The doubling of the S&P in 353 days is the fastest that the market has gone up twofold since World War II.

  • Year to date, the S&P has closed at new all-time highs on 49 days, the most since 1995.
  • Also, the last time the S&P had a pullback of 5% or more was in October. Since 1929, the S&P has experienced nine-month streaks like this only 12 other times.

What they’re saying: "The strength of corporate earnings and unprecedented monetary and fiscal stimulus have made for a one-way trade in the equity market for quite some time now," Yung-Yu Ma, chief investment strategist for BMO Wealth Management, tells Axios.

  • "The presence of a new raft of 'buy the dip' retail investors may well be one reason we’ve not seen the usual August US equity market volatility," DataTrek Research co-founder Nicholas Colas said in an email.

Threat level: Some measures of bullishness appear to be quite stretched. And extreme bullishness is generally considered a contrarian indicator for markets.

  • According to Morgan Stanley data cited by the Financial Times, 56% of all stock recommendations came with “buy” ratings, the most since 2002.
  • Bank of America’s Sell Side Indicator, which tracks the average Wall Street strategists' recommended allocation toward equities, was near heights last seen in 2007 going into the global financial crisis.

Zoom out: At this stage of the bull market, it would be quite normal to see stock prices tumble even as much as 10% over a short period of time before recovering quickly.

The bottom line: The stock market may very well be overdue for a sharp short-term pullback. But that would not necessarily signal the beginning of a protracted bear market.

Go deeper

Changing the inflation conversation

Illustration: Annelise Capossela/Axios

Inflation looks like it’ll run hot for longer than plenty of smart people thought it would. The conversation over just how much more Americans will have to pay for their stuff has taken on a new intensity, as supply problems show few signs of fading.

Why it matters: The rate of price growth has remained consistently strong in recent months — a time that some thought would bring cooling prices after an initial reopening spike. What goes on with prices will influence the decisions made by Congress, the Biden Administration, and the Federal Reserve.

Texas House probes school library books dealing with race and sexuality

Photo: Brittany Murray/MediaNews Group/Long Beach Press-Telegram via Getty Images

Texas state Rep. Matt Krause (R), chair of the Texas House Committee on General Investigating, announced Wednesday that he's initiating a probe into schools' library books, according to a letter sent to the state's education agency and other superintendents.

Why it matters: The probe focuses on books that discuss race, sexuality, or "make students feel discomfort, guilt, anguish, or any other form of psychological distress because of their race or sex," Krause wrote in the letter.

3 hours ago - World

Iran agrees to resume Vienna nuclear talks in November

Ali Bagheri (R) with Enrique Mora in Tehran on Oct. 14. Photo: Iranian Foreign Ministry handout via Getty

Iran's new chief nuclear negotiator said following a meeting in Brussels on Wednesday that Iran would resume negotiations in Vienna before the end of November, with the exact date to be set next week.

Why it matters: The Vienna talks have been frozen since Iran's new hardline president, Ebrahim Raisi, was elected in June. This is the most direct commitment from Raisi's government to return to the negotiating table.