Even though the S&P 500 $SPX500 is at all time high, we had some volatilities in recent weeks and investors are fearful of a correction or even a crash.
The reason why investors are worried even if the S&P 500 is at all time high is because many stocks are not doing well, especially those on the NYSE Composite. The spread between the NASDAQ Composite $NSDQ100 and NYSE Composite is getting larger again as the Nasdaq stocks (tech stocks) are outperforming. The Russell 2000 is down 8% from ATH which it reached in March 2021.
What's happening? The Federal Reserve System is still doing quantitative easing without the government issuing enough debt as they used to last year. Hence, demand for bonds is artificially being kept high, bringing yields lower. The fact that investors expect the Fed to be here to buy bonds, makes investors willing to keep buying overvalued stocks on the NASDAQ instead of buying less expensive ones on the NYSE. This is why the rotation we saw earlier this year got reversed.
Of course, the Delta variant is also bringing fears in the markets and normally the tech stocks would be less affected. Investors are also worried about inflation since the Fed would be compelled to raise interest rates eventually if the inflation is not only transitory.
For now, stocks are still expensive. Those which were cheap are still cheap. There is no way to predict when and how the stock market will crash. What matters is to focus on businesses and their fundamentals.