Unless you are hung up on debating the significance of closing prices vs. intraday movements, the bull market officially died on Dec. 26, 2018.

From its Sept. 21 all-time high, the S&P 500 had fallen 20.2% peak to trough (19.8% based on closing prices only) and triggered an avalanche of conversation about how soon the next recession would hit.

Fortunately, the bull has since been resuscitated.

The S&P’s 13.1% return in the first three months of 2019 is the best quarterly performance to start a year since 1998.

The dark clouds appear to have parted, but while investors congratulate each other on surviving the recent correction, don’t be lulled into ignoring the risks that remain.

To be clear, the latest rally in equities is justified. Valuations for the S&P 500 (16.6x forward earnings estimates) are fair. The Fed has committed to friendlier policy and fewer rate increases.

Equity-fund flows indicate investor sentiment remains lukewarm rather than exuberant, a positive indicator.

Like a string of 60-degree days in April, recent market movements seem to indicate more comfortable conditions ahead. But that doesn’t eliminate the possibility of a blizzard.

Here are a few items worth paying attention to:

CENTRAL BANK POLICY

The Federal Reserve’s shift from steady rate hikes to more friendly policy lit the fuse on this latest stock rally, but consider what’s behind that change: Concern that economic growth will not be strong enough to digest higher interest rates.

Fed Chairman Jerome Powell has repeatedly cited increasing evidence of a slowing global economy in his recent comments.

The European Central Bank in March reduced its economic growth forecast for the eurozone to 1.1% in the year ahead. It also announced another round of monetary stimulus that includes more loans to European banks. ECB President Mario Draghi has warned of a “persistence of uncertainties,” not exactly an optimistic outlook.

On one hand, investors (again) feel confident they are riding an easy money train created by the world’s central banks.

On the other hand, those tickets are being punched because Powell, Draghi and others foresee a steep hill yet to climb.

THE YIELD CURVE

Many economists argue an inverted yield curve is the strongest historical predictor of a recession. So, it’s notable that we witnessed an inversion on March 19 when the 3-month US Treasury bond yielded more than its 10-year equivalent.

Interestingly, the aftermath included only one ugly day for equities. The Dow fell 460 points on March 22 but has moved consistently higher ever since.

Why would investors increase risk exposure after such an occurrence?

One possibility is a fear of missing out on what could be the “last leg up” in a decade-long stock rally. History suggests it will be 12-24 months after the yield curve inverts until a recession occurs.

But is more risk a wise move at this stage of the economic cycle?

TRADE WARS

The final potential land mine we will mention is also the most obvious. Tariffs between the U.S. and China remain in place on both sides, the result of which is diminished earnings and lower GDP for the world’s two largest economies.

Despite political rhetoric indicating we are close to a meaningful long-term deal, we have little evidence to substantiate such claims. If negotiations deteriorate, tensions and tariffs would again escalate and threaten the current rally.

The path of least resistance for stock prices still appears to lead higher. Even if that’s the most likely outcome, however, it’s wise to consider what could change that narrative.

Given the risks, we advise investors to avoid being overweight with their long-term equity targets. If you haven’t yet established what those targets are, it’s time to make that a priority.