U.S. stocks are rising as investors assume that economic recovery is underway thanks to easy monetary policy and progress on trade. It may not be that simple.

U.S. equity markets are reaching new all-time highs, despite a sluggish economy and lackluster corporate earnings. The reason? Investors seem to expect the economy will grow nicely in 2020 thanks to stimulus from global central banks, a potential trade deal with China and a resilient U.S. consumer.

I’ve written recently about why this scenario, which we can sum up as the global reflation narrative, may not come to fruition, looking at current data and leading economic indicators. But looking at economically sensitive asset classes, I also don’t see confirmation of the enthusiasm.

Here are a few indicators and asset classes at odds with the U.S. equity market:

  • Real rates,” which are interest rates adjusted to remove the impact of inflation, are flat. Real rates are a proxy for real growth, so I would expect to see some confirmation of the bullish thesis. I don’t.

  • Gold has been flat recently after rallying over the summer when global growth was stalling. If the economy was recovering, I’d expect gold, which is sometimes used as a hedge against volatile markets, to retreat.

  • Copper, which usually rises with economic growth due to increased demand, has also stayed range-bound, despite the gains in stocks.

An important point to keep in mind as we consider the reflation narrative is that liquidity isn’t always a friend to investors. We are essentially now in another round of global quantitative easing (QE), a form of monetary policy when central banks buy bonds to inject more cash into the economy. Recent periods of QE have caused stocks to surge, but then to correct once the round of easing ended.

Also, the bond market is vulnerable when central bankers are trying to increase inflation, as they are now.  Interest rates tend to climb (and bond prices fall) when inflation expectations rise. Excess liquidity can compound this effect since it leads to low volatility, which drives investors (and money) toward riskier assets and, counterintuitively, can lead to lower prices (and higher rates) for low-risk Treasuries.

An overshoot on inflation by the Fed and other central bankers could pose problems for bonds and interest rates and, in turn, the valuation of stocks and the U.S. dollar. To hedge against these risks, a tactical allocation to real assets—real estate, commodities, infrastructure or Treasury Inflation-Protected Securities (TIPS)—is worth considering.