Six reasons that the risk of a stock-market selloff is rising. Here’s what investors should be doing.

Analysts at Longview Economics caution that many markets are now priced for perfection, meaning valuations and earnings expectations already assume near-flawless outcomes. When that is the case, the margin for error becomes very thin. Any disappointment—whether in corporate guidance, inflation data, or central bank communication—could prompt a swift repricing that leaves little room for downside protection. Elevated valuations themselves are not a trigger, but they do make markets more sensitive to unexpected news.

The relevance for investors lies in understanding risk, not in predicting a timeline. Markets can remain stretched for a long while, yet the combination of crowded positioning and optimistic assumptions tends to amplify reactions when sentiment turns.

Useful signals to watch include revisions to earnings forecasts, credit spreads, and the breadth of market participation. If these begin to deteriorate, it may indicate that complacency is cracking. Maintaining a portfolio aligned with long-term objectives and being mindful of exposure to richly valued assets is a prudent discipline—though reacting emotionally to headlines rarely is.