The global stock market rally may be running on borrowed time after a blistering momentum in 2025, with veterans warning that the odds of a correction are rising as stretched valuations collide with mounting geopolitical and policy risks. Equities entered 2026 on a steady footing after a robust year. The MSCI All Country World Index , which measures the performance of over 2,500 large and mid-cap equities from developed and emerging markets, is up over 2% so far this year. It hit a fresh record on Jan. 15 after gaining 20.6% in 2025, data from LSEG showed. However, some investors say the lack of meaningful pullbacks over the past nine months has left markets increasingly vulnerable to a sudden shift in sentiment. “Markets, having had a very good 2025, particularly Asian markets… and having gone over nine months without a meaningful pullback, the historical clock is ticking in terms of markets being overdue for some sort of a correction,” said Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs. Over the past 15 to 35 years, markets have typically experienced a correction of 10% correction or more every eight to nine months, Moe said. “And we’ve not had that,” he added. “If there’s a catalyst in the form of geopolitical risk concerns, then I think investors need to be aware that there could be some sort of a pullback.” Investors have largely shrugged off bouts of geopolitical brinkmanship, treating recent episodes, including the standoff over Greenland, as noise rather than a lasting risk. Markets also rallied after U.S. President Donald Trump’s latest walk-back on tariff threats in pursuit of a deal. That response has revived talk of the so-called “TACO” trade, shorthand for “Trump Always Chickens Out,” reflecting the belief that aggressive rhetoric will ultimately give way to compromise. Moe likened the current investor sentiment to a chemistry experiment in which nothing appears to happen until suddenly it does: “You keep dropping, dropping, dropping, dropping, nothing happens, and then with one final drop, the color changes,” he said. “Markets tend to ignore [geopolitical risk] until it really matters.” Despite those concerns, Moe said he remains broadly bullish, particularly on Asian equities, but noted that risk management has become increasingly important. When valuations are stretched and sentiment is frothy, there is a stronger chance for pullbacks to be more severe. Schwab Center for Financial Research Kevin Gordon Others cautioned against placing too much emphasis on how long it has been since the last correction when assessing market vulnerability. Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, said the risk of a correction has risen, but not necessarily because markets have gone too long without one. “When valuations are stretched and sentiment is frothy, there is a stronger chance for pullbacks to be more severe,” Gordon said. Still, optimism alone is rarely enough to derail markets. “There needs to be a negative catalyst.” Potential triggers range from geopolitics to policy shifts and earnings disappointments. Gordon said measures such as credit card rate caps or escalating geopolitical tensions could hit stocks if they begin to pose a meaningful or material risk to companies’ bottom lines, or drive bond yields sharply higher. Miroslav Aradski, associate vice president of BCA Research’s global investment strategy team, said different methods of measuring drawdowns can yield very different conclusions. Using rolling peaks, which measure declines from the most recent market high rather than calendar periods, the S & P 500 has gone 185 days without a 10% drawdown, a stretch that, by itself, does not signal an imminent correction. Still, Aradski warned that extended calm can breed complacency. Geopolitics remains a particularly unpredictable risk, even as markets appear increasingly desensitized to political rhetoric. “There is a deep paradox at the heart of the ‘TACO trade,'” Aradski said, referring to markets’ tendency to fade policy threats on the assumption they will be walked back. “In the absence of market discipline, Trump has more leeway to pursue potentially destabilizing policies. This means that when the next crisis comes, it could be bigger than the last one.” From a technical perspective, Jay Woods, chief market strategist from Freedom Capital Markets, said markets are showing classic signs of late-cycle behavior. Strong earnings have not consistently translated into sustained price gains, while leadership has narrowed around megacap stocks. “The major indexes have stalled for now but overall market breadth remains healthy,” Woods said, citing rotation into small caps, materials and energy. That said, market watchers warned that any stumble among the largest technology stocks could have an outsized impact. “The Nasdaq 100 hasn’t made a new high since last October and may be the first of the major indexes to correct,” Woods added. Schwab Center’s Gordon also cited the durability of the artificial intelligence boom as a key risk. Markets have grown increasingly skeptical about whether surging capital expenditure by hyperscalers will continue to translate into earnings growth. “That won’t be the case forever,” he said, noting that leadership has already begun to rotate toward small-cap stocks and more cyclical sectors.