Wall Street's latest rally made in China?

In part, investors seem to be expressing confidence that the Federal Reserve is staying ahead of the inflation curve, having raised short-term interest rates 15 times in less than two years.  But that streak could be coming to an end.

In minutes of last month's meeting of policy-makers released this week, central bankers indicated they were ready to move to the sidelines, suggesting to many observers that the Fed will at least pause after raising rates one final time May 10.

In the past, the end of a Fed rate-hike campaign has sometimes led to a stock market downturn, possibly because the Fed tends to overshoot and applies the brakes too hard, stunting growth. In the months after the Fed stopped raising rates in May 2000, for example, the Standard & Poor's 500 fell about 4 percent. It was just eight months later that the Fed began aggressively cutting rates in an effort to boost the flagging economy.

Similarly in 1981 the stock market fell 8 percent after the Fed stopped raising rates. But in the mid-1990s, the roaring bull market ignored those signposts, racing on during the plateau periods between Fed rate campaigns, said Sam Stovall, chief investment strategist at S&P.

Still, Stovall said, over the past 30 years the stock market generally has performed most strongly in the period leading up to the Fed's final rate move of a series. "Really most of the euphoria has already taken place," he said.

And Kleintop said the uncertainty associated with midterm elections is generally not a positive factor for the stock market.

Pat Dorsey, senior stock analyst at Morningstar.com, warns against investor complacency as the bull market settles into its run.

He sees a warning sign in narrow emerging market "spreads," pointing out that returns on many emerging market bonds currently are not much above the returns on securities issued by mortgage giants like Fannie Mae, which are considered virtually as safe as U.S. Treasuries.

"People are taking risks and not getting paid for it," he said.

He recommends to look for high quality big cap stocks that have been out of favor for years and may be available now for attractive valuations, mentioning companies like Wrigley, Dell, Wal-Mart and Amgen.

"We haven’t had a major pullback in three years," he said, and issued a caution. "One of the most powerful and dangerous biases people have is recency — the tendency to take the most recent trend and extrapolate it into the future."

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