History tells us that we have to be wary of stocks this year after Wall Street’s unbelievable performance in recent years, regularly beating all-time record highs. And adding to the speculation that a sell off is wildly overdue is the fact that this is the best start for US stocks in 31 years!

But you have to ask: is this euphoric madness or not?

I’ve regularly cited the wise lesson about bull markets from legendary investor Sir John Templeton that “Bull markets are born on pessimism, grown on scepticism, mature on optimism, and die on euphoria.”

So, are the Yanks in the euphoric zone? And long can it last? And what are the smartest guys in the room doing in 2018?

Goldman Sachs says, “risk appetite is now at the highest level on record, which leads to the question what future returns can be?” And Howard Marks Oaktree Capital on CNBC sounded a warning bell that: “Prospective returns are well below normal for virtually every asset class. Thus, I don’t see a reason to be aggressive.”

These observations are preaching caution but they’re not canvassing the possibility that the bull market is close to dead. A lot of smarties think we have to see a stock market pullback — less than a 10% drop — or a correction — 10% or more.

The S&P 500 has gone over 400 sessions without a 5% drop and that’s another stock market record!

However, no-one of note expects a crash — a 20% plus wipe out — and in fact, if you look to some of the smartest market thinkers on the planet, you’d have to remain long stocks for 2018 and I reckon 2019 is not a big risk either.

Over the April to October period this year, we could see some volatility with some profit-takers not able to resist pocketing some profit but this will create another buying opportunity.

When you listen to experts, you always have to reconcile their time horizons to yours. A fund manager might have a short-term position on some companies preferring to take profit, say, before some seasonal challenge for a commodity or a stock. However, a long-term investor might not care about short-term fluctuations so long as the long-term trend still favours you.

It seems to me that the only strong reason to think there could be trouble for the stock market is that it has gone on so long without a sensible pullback. But these aren’t sensible times.

Donald Trump is President. He’s cutting back regulation, which might not prove sensible, and he’s bringing in big tax cuts that might not be fiscally sensible. Interest rates are at hardly historically sensible levels and politics worldwide is a long way from being sensible!

And this might all explain why stocks are defying gravity and what some pundits think is sensible.

I think the low interest rates, the rebound of the global economy and the related improvement of company earnings is the key to this crazy stocks story. And sensible people are making sense of it.

Harvard economics professor Kenneth Rogoff said this week that right now “is the best moment in the global economy since the ’50s.”

Making me a little nervous is the fact that everyone seems optimistic, which a contrarian might take as a sign that it’s time to take profit.

“Ninety-one percent of investors who have more than $1 million in brokerage accounts rated the U.S. economy at an A or B in the first quarter, the highest level ever recorded by the E-Trade survey, provided exclusively to CNBC.

“The percentage of these investors who grade the U.S. economy at an A increased from 8 percent in the fourth quarter last year to 24 percent in January. Eighty-one percent also think the economy is healthy enough for additional Fed rate hikes, up from 67 percent in Q4 2017.”

What was interesting about these US investors was that they were becoming less USA-centric.

Last quarter, 51% of these investors said international markets looked attractive to them. This quarter, 67% of these same million-dollar account investors were seeing overseas stocks as attractive.

I don’t think you can believe that we won’t see a sell off this year but I also think you can believe stocks will go up this year and even into 2019. When my analysis and gut feelings make me positive when possible threats can’t be ignored, I like to survey the smartest people I know to see if I’m missing something.

Ray Dalio, the hedge fund manager and founder of Bridgewater & Associates, told last week’s World Economic Forum at Davos that “the rally will continue in the near term.”

He identified risks as being geo-political, such as what Donald Trump and Kim Jong-un get up to.

He’s also watching how fast the Fed will raise interest rates. If they move too fast, the stock market could have convulsions and the bond market could have some really bad moments.

And while he thinks the tax cuts will promote growth for stocks, he worries that the wealth gap could create longer-term issues for the US economy.

From that you could easily be comfortable about stocks, at least for 2018. And what about Ray’s investments? What does he like?

The marketrealist.com website outlined his biggest holdings and he certainly liked emerging economies.

Here are Bridgewater’s biggest holdings:

• Vanguard’s FTSE Emerging Markets ETF (VWO) 25.82%.
• iShares MSCI EM ETF (EEM) 19.67%.
• SPDR S&P 500 ETF (SPY) 15.98%.
• iShares Core MSCI EM ETF (IEMG) 8.98%.

Anyone looking for some alpha in their satellite or smaller speculative holdings could do worse than follow Ray’s guidance.

In the early 1980s, before he perfected his computerized systems for investing, he had to shrink his business and borrow $4,000 from his Dad to make ends meet. He now reportedly has the fifth most important private company in the USA. He’s in the top 100 richest people in the world and Time.com named him in the “hundred most influential in the world”!

And he really confirmed his greatness by working out that the GFC was coming.

One final point. I think the emerging markets and European play make a lot of sense but maybe if you’re not on board now, then you should wait for a sell off and then treat it as a buying opportunity. An ETF such as IEU — iShares for European exposure — is close to its all-time highs. I think it will eventually take it out but the rise over the last 15 months has been pretty steep.

Ultimately, 2018 could easily be a “sell in May and go away” year, given how high stocks are now, which might be the time to play catch up overseas-wise but this is me being very speculative, so don’t take this as advice!

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.