Explainer: Why Boeing, Apple, Chipotle, AMD, FedEx, and Pinterest are trading at 52-week highs

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Investors are trapped in the hype bubble.

Hats are flying for Dow's hitting 37,000, with eyes toward 40,000 in 2024 (it's not that far away). Crypto is rocking. 401(k)s are probably doing pretty darn well amid the rise in equity prices. Retail sales look solid this holiday season. Inflation continues to cool.

Things just feel good in the markets a few days before Christmas.

And believe me when I tell you, the hype on growth in 2024 — for stocks and the economy — is spreading like wildfire.

Read more: How to start investing: A step-by-step guide

I was in a standing-room-only reveal at the Nasdaq last week for Intel's new AI-powered chips. You would think Intel was handing out free money like the Fed did during the pandemic! CEO Pat Gelsinger lit the room up with his trademark charisma — after his heavy-on-the-AI keynote, Intel's stock popped almost 5%. This all happened in under 10 minutes.

Hype bubble vibes.

I took a glance at the Yahoo Finance 52-week high list and two takeaways emerged. Fundamentally struggling companies such as FedEx (FDX) have marched toward 52-week highs. In the meantime, already richly valued companies such as Chipotle (CMG) are now trading at even loftier valuations.

Fundamental problems ignored. Record valuations ignored. Hype bubble vibes.

So what is really going on here? Is the outlook for corporate profits in 2024 so grand as to justify an everything rally?

I truly believe it's beneficial for you, the investor, to understand the mechanics of what we are witnessing here. It will prevent you from making bad decisions on those 52-week-high stocks you just purchased because it felt like the right thing to do.

Remember, good times in markets don't last forever.

For a simple dose of analysis, I phoned a friend, Truist's co-chief investment officer Keith Lerner. I have known Keith for a good while, and he is my go-to source for deep market insights. His work is some of the best in the game in part because, like me, he eats, sleeps, and breathes what he does.

"The most important driver/fuel behind equity rally is the 10-year US Treasury moving from a 5% to sub-4%. And part of that is because Fed chief Jerome Powell has pivoted hard from talking about still needing to raise rates to opening the door to cut rates, but also the inflation numbers have continued to trend the right way as the economy has cooled but not folded. The move down in rates has reduced pressure on some of the most interest rate-sensitive areas of the market such as small caps and real estate. At the same time, forward earnings estimate for the S&P 500 continue to make record highs," Lerner told me.

He continued, "The market has also pivoted hard from a hard economic landing to placing greater odds that the Fed can maneuver a soft economic landing. Investors were not positioned for this outcome and with many managers underperforming, since they did not have enough exposure to the 'Magnificent Seven,' stocks have rallied hard. And many of the beaten up are leading since they were the cheapest and many of these stocks were pricing in recession risks, which is being unwound."

So the reality is if these conditions change, markets will pull back. It's up to you to study hard to see if they are changing. Investing could be this simple.

Lerner doesn't rule out some changes in market dynamics soon.

"The setup for the market entering 2024 is almost the opposite of coming into 2023. Coming into 2023, the bar for positive surprises was very low — the market had a correction in December, after an already challenging year, and sentiment was very depressed. Entering 2024, we have had a very sharp rally and sentiment is much more bullish — thus, the bar for positive surprises is much higher. Also, the first part of an election year also tends to be choppier," Lerner added.

Happy holidays!

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.

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