Recent stock rally has been strong, but several things could trip it up

NEW YORK -- The summer rally on Wall Street sizzles on. Stocks are at fresh 2009 highs. And many signs point to an economic recovery.

But all that upbeat news raises a key question for investors: Is there anything that can derail this unexpectedly powerful bull market that has pushed the broad U.S. stock market up a lofty 52% since it bottomed out on March 9?

Playing devil's advocate might seem misplaced after Tuesday, when stocks continued their rise after a key housing price index posted its first quarterly rise in three years and the latest reading on consumer confidence beat expectations. The reports raised hopes that the housing slump has hit bottom and that consumers are feeling less pessimistic about their financial condition, providing fresh ammunition to investors betting on a lasting economic recovery.

But given that no bull market lasts forever, it seems prudent to consider what might put an end to the run-up.

Possible bull market killers:

•A double-dip recession. Just because many economists believe the recession that began in December 2007 is over and a recovery is on the horizon doesn't mean the economy can't suffer a relapse that will put renewed pressure on consumers, corporate profits and stocks, says Steven Ricchiuto, chief economist at Mizuho Securities USA.

"A double dip (or W-shaped recovery) is a realistic alternative to the consensus of a sustainable recovery," he says. The need for consumers to rebuild their savings after the recession and real estate bust, coupled with the phasing out of government incentives such as the cash-for-clunkers program and $8,000 tax credit for first-time home buyers, could reduce the demand for consumer purchases going forward.

•A seasonal swoon. When it comes to stock performance, historical data show the month of September is dead last, a fact that could spook investors and result in a self-fulfilling prophecy of falling prices.

"September is typically a bad month," says Paul Hickey of Bespoke Investment Group. "Bad things have tended to happen." Last year the bankruptcy filing by Lehman Bros. was blamed for causing a market panic. In September 2001 the market was undone by the terrorist attacks.