Everything has a price. Yet investors in US stocks seem to have forgotten that. Despite elevated fundamental valuations and a fresh wave of geopolitical tension, capital keeps flowing into the S&P 500 as if nothing has changed.

Bank of America recorded an unprecedented $119.2 billion inflow into US stock funds for the week ended June 17. On an annualized basis, the figure is heading toward a record $739 billion in 2026, which would surpass all previous highs. The numbers are impressive, but they mask a growing disconnect between price and fundamentals.

The so?called CAPE excess return — the gap between the S&P 500's earnings yield and the 10?year Treasury yield — has compressed to 1.3%. That is the lowest level in the past decade. If Treasury yields don't move lower, this level of expensiveness could become a headwind for the broad equity index.

Worrying valuations are not the only problem for the US stock market. Investor nervousness and fears of an S&P 500 correction are fueled by Kevin Warsh. At his first FOMC meeting, the new Fed chair repeatedly spoke of the Committee's "unanimous and unambiguous" commitment to price stability. Investors immediately ramped up bets on tighter monetary policy. The odds of two acts of monetary tightening in 2026 are now 59%, and the chance of a September move is 77%. Isn't it odd that an official appointed by Donald Trump — reportedly to ease policy — is speaking like a hawk?

It's not only monetary policy worrying the bulls. Iran announced the framework peace agreement in the Middle East was no longer in effect after fighting resumed in southern Lebanon. The Strait of Hormuz remains closed, along with hopes for a quick drop in oil prices. Fortunately, with mediators Qatar and Pakistan involved, the flare?up was later contained.

There's a sense of deja vu. Just as before the 2025 correction, the crowd turned a blind eye to inflated tech valuations, investors today prefer not to notice high multiples or geopolitical risks. FOMO — the fear of missing out — typically wins out over caution.

If Treasury yields continue to rise in step with Kevin Warsh's hawkish rhetoric, and if the ceasefire proves fragile, these record capital inflows could turn into a major disappointment.

Technically, on the daily chart, the S&P 500 is still working off an inside?bar setup. A break above the inside bar's high at 7,510 would justify adding longs in the broad index. Conversely, a successful breach of the inside bar's lower border near 7,470 would increase downside risk. Pullbacks could be bought on bounces from supports at 7,430, 7,360 and 7,300.