Stock Market Records Divide Investors Amid Fed and Yen Risks

Record highs arrive alongside yen warnings and a divided Fed

Those who bought equities after last April's tariffs have nearly doubled their money. Those who waited in cash have watched the train pass by, feeling uncomfortable that markets have disconnected from the real economy. This week, Spain's Ibex approaches 20,000 points, the S&P 500 nears 8,000, and the Nasdaq again outperforms the Spanish index. The party is real. Yet, there have never been so many warnings that the hangover could be severe.

The data point that doesn't fit the bullish narrative

Everything is rising, they say. That isn't true. The US ten-year bond yields around 4.69% and does not trinc the trend: price and yield move in opposite directions, meaning fixed income is penalized, not at record highs. And the Federal Reserve is hardly projecting calm. In July, it held rates steady with a split 9-3 vote, with Warsh discussing restoring credibility against inflation. Since then, the market assigns higher probability to a rate hike in September than to a hold. In this scenario, stock market records look more like excess liquidity than a bet on the economy.

Record profits or creative accounting: the depreciation debate

There is a second front of skepticism, and it is not minor: earnings quality. Major cloud operators have extended the useful life of their servers to five or six years, while Nvidia's product cycle lasts twelve to eighteen months, and a GPU generation becomes obsolete for main workloads within two years. Extending the depreciation schedule reduces annual expenses and inflates reported operating profit without any change in the business. It is legal, of course. From an outside perspective, it is also accounting window dressing. The debate is set: part of the profit justifying the multiples is not genuine.

The shadow of the yen and the ghost of the carry trade

The most repeated argument among those advocating taking profits is the reverse yen carry trade. The idea: if financing in yen ceases to be attractive, money that left Japan seeking dollar returns may return abruptly. The US Treasury has already sold euros to buy yen and warned it will continue. According to this analysis, the yen cannot afford to fall below 160 per dollar due to oil prices. If Japan raises rates, already at three-decade highs, the American stock market party might last "barely two weeks." It is an extreme scenario, but no one entirely rules it out.

Rally breadth: it’s not just about ten companies

One piece of data dismantles the concentration narrative: the equal-weighted S&P 500 is up more than 13% year-to-date, compared to 9% for the cap-weighted index. The average stock is beating the index, the opposite of what peine in 2023 and 2024. The Russell 2000, the index of small and mid-cap US companies, recovered its all-time high in September 2025, after a desert of nearly four years since the previous record of 2,442 points in November 2021. In other words: the rally is broad. Historically, this is usually healthy. It is also often the phase where money enters through euphoria, just before the turn.

Curiously, both sides use the same data to defend opposing positions. For some, the rally's breadth confirms it is real. For others, it is the final warning before everyone wants to exit at once. Market jargon repeats the saying: let someone else take the last euro. With the bond at 4.69% and a divided Fed, no one can claim they weren't warned.