Wall Street’s winning streak may be coming to an end. After a rally that matched records set during both the fall of the Berlin Wall and the bull run of 2004, markets are wavering, with the Dow notching its fourth-straight day of losses on Thursday.

Until this week’s pullback, the market’s recent performance told a remarkable story.

The S&P 500 rose for 37 of the last 51 weeks, matching a record reached in both 1989 and 2004. The benchmark index is also on track to post back-to-back annual gains above 20% for the first time since 1997, helping Americans’ retirement accounts recover from 2022’s brutal losses.

But now that momentum appears to be easing.

While the tech-heavy Nasdaq and S&P 500 managed to eke out modest gains on Thursday, the Dow’s decline suggests some concerns remain.

So was this week just a temporary setback? At least three major hurdles stand in the way of the current rally continuing.

Political uncertainty

With polls showing a tight race for the White House, investors have been increasingly on edge about the prospect of former President Donald Trump winning the election. While polls remain effectively dead even, political betting markets have swung in Trump’s favor since the start of this month.

“The logic here is very simple: Candidate Trump has called for a significant increase in import tariffs to revive domestic manufacturing,” Steven Ricchiuto, chief US economist at Mizuho Securities, said in a Wednesday afternoon note. “These tariffs are seen as immediately raising the price of consumer goods and, in the process, reversing the goods deflation that has helped pull inflation back towards the Fed’s 2% target.”

Escalating tensions in the Middle East, meanwhile, have led to sharp swings in oil prices especially following Iran’s missile strikes on Israel.

Market warning signs

The stock market is looking expensive. Stock prices compared to company earnings over long periods have only reached their current levels twice before – during the dot-com bubble of the late 1990s and in 2021. In both cases, that market euphoria didn’t last long and stocks soon fell sharply.

Deutsche Bank analysts warn that the recent rally may be difficult to sustain given these historically high valuations.

Even more worrying, the US is headed for budget deficits between 7-9% over the next few years – levels typically seen only during major wars or economic crises, said Henry Allen, a strategist at Deutsche Bank, in a recent note.

Rally running out of fuel?

The economy’s surprising resilience through 2024 has been a double-edged sword. While it’s helped drive stocks higher, it also makes it harder to exceed expectations going forward.