It’s been a tumultuous summer for markets, but investors have mostly ploughed through the volatility and pushed stocks steadily higher — but one top bank is warning not to get comfortable.

The S&P 500 is up 8% year-to-date, and the benchmark index is cruising near record highs in the late summer stretch. Solid earnings, a still-strong economy, and more AI hype have pushed stocks ever upward.

However, Morgan Stanley thinks there are a few things that could snap the winning streak.

Here’s what the bank is looking at:

A cooling labor market

Since the July jobs report, fears have swirled that the recent strength in the job market may have been a mirage.

Data from the Bureau of Labor Statistics showed that the US economy added 73,000 nonfarm jobs, short of the estimated 105,000. The revisions for the prior two months were also sharply negative.

While the Trump administration has questioned the accuracy of the data, Morgan Stanley sees cause for concern. “We believe that the trend, if not the exact level, is substantiated by the broad data mosaic,” Lisa Shalett, chief investment officer of the bank’s wealth management group, wrote on Monday.

“According to the Bureau of Labor Statistics’ JOLTs survey, job openings fell to 7.44 million at the end of June, equating to a weak openings-to-job-seeker ratio of roughly 1:1,” Shalett added.

The report highlighted several other economic data points that point toward slower economic growth, including a survey from the Institute for Supply Management which showed new employment contracting at levels that may indicate a coming recession.

Skewed Q2 earnings

Shalett acknowledged that Q2 earnings season showed strong growth for many companies, particularly those in the tech sector. S&P 500 earnings beats have managed to remain at or above the 80% benchmark with a few weeks left to go.

However, despite positive sentiment from investors, Shalett said that the a peak under the hood of the latest quarterly results tells a slightly different story.

“Only three of the 11 major equity sectors—information technology, communication services and financials—posted double-digit gains,” the report said.

It added that while the members of the Magnificent 7 are growing at a rate of 26% for the year, that still leaves 493 companies that are barely up, if at all, on a year-over-year (YOY) basis.

“Is the economy really robust if most of the largest-cap companies’ profits are only in line with nominal GDP growth?”

A potential “stagflationary” pause

Shalett flagged two themes that have dominated economic conversations recently: inflation and the possibility of stagflation, which could curtail the forces pushing markets up.

With President Donald Trump’s trade war still raging, concerns about inflation have spiked, but the overall economy appears to be in good shape for now.

However, Morgan Stanley said that this could be temporary.

“This may be a case of pain delayed, not denied, as the most recent final-reciprocal-tariff announcements set rates nearly double the 10% level to approximately 18%,” the report stated.

Other analysts and commentators have raised similar concerns, noting that tariffs could cause the state of the economy to deteriorate, even as investor optimism remains robust.