This is peak investing: Stocks, bonds and concerns are up

NEW YORK » Everything is awesome for investors. Everything.

Stocks are at peak levels. Bonds are making money despite a raft of predictions to the contrary at the start of the year. Stock markets overseas, notoriously poor investments for much of the last decade, are perking higher. Even gold, which typically glitters brightest when other markets are struggling, is up this year.

If it feels precarious to have so many investments doing so well, particularly when the economy itself is still growing only modestly, markets are giving few indications of worry. The volatility index that traders use to measure fear in the U.S. stock market hit its lowest, as in calmest, level last week since 1993. And stocks have been so strong for so long that investors have been rewarded for using any dip in prices that does happen as an opportunity to buy low.

The latest example was the pullback for big technology stocks that began on Friday. Apple, Facebook and other technology giants that had been among the market’s biggest stars slumped, seemingly on the simple worry that their runaway success had made them too expensive. But the rest of the market held steady through the mini-bout of tumult, and the tech giants got back to climbing again on Tuesday.

Analysts pin much of the credit for the upsurge in markets on all the stimulus that central banks have thrown at them. By keeping interest rates low and buying trillions of dollars of bonds, the Federal Reserve, European Central Bank and others have helped lift prices for bonds. And when bonds get more expensive, it makes stocks and other types of investments more attractive in relative terms, even if their price tags no longer look cheap at face value.

That has some contrarians worried about what will happen as the Federal Reserve continues raising interest rates and talks about paring back its bond investments. And, perhaps more importantly, what will happen when other central banks join in. Momand-pop investors seem relatively unfazed for now. They have been plowing cash into stock and bond funds this year, but concerns are bubbling up elsewhere.

Bill Gross, the famed bond fund manager, recently cautioned investors to not “be mesmerized by the blue skies created by central bank” actions. “All markets are increasingly at risk,” he wrote in his most recent investment outlook.

Big institutional investors have begun cashing in some of their winnings and have sold some stocks or moved into less-risky areas of the market, said Kirk Hartman, global chief investment officer for Wells Fargo Asset Management. Even he himself has dialed back a bit on stocks.

“In my own portfolio, do I have more cash than earlier in the year?” he said. “Absolutely.”

If stocks do end up having a sharp pullback, he wants to have cash on hand to pounce quickly and buy some more.

Here’s a look at what’s been driving markets, and what risks lie beneath: