The Dow Jones reached 22,179 while the S&P 500 hit 2,490 shortly before deteriorating relations between President Donald Trump and North Korea paused the rally.
But as share prices become increasingly expensive, many fear the market could be on the brink of a serious crash that brings values back down to earth.
Technology companies have seen some of the biggest jump in prices.
Facebook, Amazon, Apple, Netflix and Google – the so-called FAANGs – are among the companies that have led the charge in rising prices.
At the same time, cash into passive investments, which simply track stock indices, Exchange Traded Funds (ETFs) have also surged this year.
It’s feared this rush to plough money into funds that are not actively managed is helping to inflate the bubble – and could exacerbate a crash.
Howard Marks, co-founder of Oaktree Capital, a US alternative investment manager, told the Financial Times: “When the management of assets is on autopilot, as it is with ETFs, then investment trends can go to great excess.
“It is not clear where ETFs and index mutual funds will find buyers for their holdings if they have to sell in a crunch.”
And Paul Singer, the chief executive of US hedge fund manager Elliott, said the demand for ETFs has “created the illusion that simply holding stocks and bonds in their index weights and sitting back, arms folded, is the perfect investment strategy”.
A crash could come about if there is a fast change in investor sentiment.
And markets could be spooked by political events, including Mr Trump’s relations with North Korea.
Experts have now said investors should closely watch the direction of technology stocks.
Kathleen Brooks, research director at City Index Direct, said: “There are some genuine concerns that valuations are now getting strained.
“Technology shares led the market rally higher this year and they are likely to lead it lower when the time comes for the market to correct.
“Thus, price action in the FANGS will be worth watching closely in the next day or two. Apple fell sharply on Wednesday and Thursday last week and was down four per cent, it managed to recoup nearly half of that loss on Friday.
“However, the market will likely only be comfortable with the tech titans once Apple gets above last week’s high at $161.83, Friday’s closing price was $157.48.
“If we get a failure at this level then it would give a big clue about market sentiment, namely that it is fragile and any further escalation in geopolitical fears, and/ or signs of stress in the credit markets could be enough to trigger a deeper market sell off.”
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