“The US market looks particularly expensive,” Hollands said. “The extreme levels of money printing in recent years by the US Federal Reserve and other central banks, combined with ultra-low interest rates, has turbocharged markets and inflated asset prices.”

Globally, central banks have embarked on a journey that will eventually result in more “normal” monetary policy. The Bank of England ended its own Quantitative Easing (asset purchase programme) in 2012, while the Fed has been scaling back its stimulus since the start of this year.

As well, leaders of the world’s most important central banks, including Mark Carney, governor of the Bank of England, and Janet Yellen, head of the US Federal Reserve have been indicating interest rates could start to rise again soon.

Higher interest rates could hurt many S&P 500 companies whose earnings growth in recent years has come, predominantly, from the ability to refinance debt very cheaply.

Hollands said these are indications that “some steam coming out of the pressure cooker is a possibility.” He doesn’t see a stock market crash deeper than 10% but said “when a wild party comes to an end, it'll leave some with a hangover.”

A set of triggers

Triggers for a drastic market correction — such as an interest rate shock and steep stock prices in the US, overheated housing market in Canada, geopolitical events in the Middle East and Ukraine, economic slowdown in emerging markets, and fears of recession in Europe — are all there, yet market volatility (a measure of how widely prices swing) has been eerily low, said Hollands.

“This feels like there’s too much complacency,” he said. “You could think of it as the calm before the storm.”

Increased interconnectedness within key global markets means that the meltdown will likely spill over into other regions, regardless of where it begins. “There's a saying that when America sneezes, the rest of the world catches a cold,” said Hollands. “Were the US market to experience a slide, you might see contagion to other exchanges.”

Similarly, the Greek debt crisis and fears of hard landing in China in the recent past showed that a macroeconomic event can have a knock-on effect on financial markets far from its epicenter.

“All major equity markets could be susceptible to a correction,” said Ablin but asserted that “US small caps appear to be among the most precariously positioned markets now, due to their high valuations.”

Small capitalisation stocks are companies that have revenue of more than $300m but less than $2bn. These companies, said Rosenberg, have been selling for 20 times their earnings versus the historic average of 15 times. Large-cap stocks, companies that are larger than $10bn, have been selling for 15.5 times their earnings relative to the long run average of 13.5 times, he added.

At biggest risk

When US investors panic, they have a tendency to sell the assets they hold overseas and bring their cash home. That means that emerging markets, including Mexico, Turkey and Indonesia, are often the first casualty. Currently, emerging markets appear calm, but Hollands said trouble could be brewing underneath the surface.

“The big risk remains in China,” said Hollands. “Its economic growth rate is slowing, but it has only scratched the surface so far in terms of its need to rebalance its economy away from construction and infrastructure investment and towards the consumer.”

Yet in India, the other key member of the economic bloc, positive macroeconomic data and political developments have kept the market buoyed.

Bengaluru, India-based Kunal Kumar Kundu, vice president and India economist at French financial firm Societe Generale doesn’t foresee a meaningful decline in India.