It’s been a wild ride this year, hasn’t it? After a gut-wrenching 19% drop from its record high following the announcement of the “Liberation Day” tariffs back in April — one of the sharpest two-day plummets in history — the S&P 500 has come storming back. A stunning 30% rally since that low has many investors feeling like the good times are here to stay. And why not? Corporate earnings have been surprisingly robust and, until recently, the economic data seemed to hold up.

But if you listen closely, you can hear a creaking sound beneath the market’s floorboards. Two major issues are staring us right in the face, and it pays to be skeptical when the crowd is euphoric. Let’s look past the champagne-popping headlines and see what’s really going on.

First, there’s the little matter of the administration’s ever-shifting tariff strategy. The President insists his trade policies are making the economy boom, but the employment numbers are telling a very different, and much more worrying, story. We’ve seen a dramatic slowdown in hiring. The U.S. economy is now adding jobs at its slowest pace since the recovery from the 2008 Great Recession, excluding the pandemic anomaly. Businesses, it seems, are hesitant to bring on new staff when they have no idea what trade policy will look like next month, or even next week. This uncertainty is a wet blanket on growth. Slower hiring means less consumer spending, which ultimately threatens the very economic expansion the market is celebrating.

The situation wasn’t helped by the recent controversy at the Bureau of Labor Statistics. After a sharp downward revision of initial job numbers, the administration dismissed the agency’s commissioner. While the President claimed manipulation, many economists noted that such a move could damage trust in the very data we all rely on to make sound financial decisions.

If a slowing economy isn’t enough to give you pause, let’s talk about valuations. To put it bluntly, the stock market is expensive. Historically, terrifyingly expensive. The S&P 500 is currently trading at a forward price-to-earnings (P/E) ratio of 22.1. That’s significantly higher than both the five-year average (19.9) and the ten-year average (18.5).

Now, a high P/E ratio isn’t automatically a death sentence, but context is key. In the last three decades, we’ve only seen valuations this stretched during two periods: the peak of the dot-com bubble and the height of the COVID-19 pandemic. We all know how both of those parties ended. Looking at another metric, the cyclically adjusted P/E ratio (or CAPE ratio), which smooths out earnings over a decade, tells a similar story. At 37.9, we are approaching some of the loftiest levels in market history.

So, what’s the takeaway here? It’s easy to get swept up in the momentum of a bull run. But with a tariff-induced economic slowdown meeting a historically pricey market, the risks are undeniable. The bullish sentiment can’t last forever, and history strongly suggests that valuations at these levels are unsustainable. It’s a great time to review your portfolio and be cautious. The market might be climbing a wall of worry, but that wall is starting to look mighty shaky.