CNBC reports that veteran investor David Roche says investors should be wary of the bubble bursting, as the S&P 500 notches record highs despite the backdrop of potential monetary tightening and the new delta Covid-19 variant.

The Fed recently surprised markets with a slightly hawkish pivot, upping its inflation expectations and bringing forward its interest rate hike schedule to indicate two raises in 2023.

Roche, president of investment firm Independent Strategy, said current valuations were a “bubble.”

“These things always come to an end, and it’s very hard to say what the catalyst that will bring it to an end will be. It could be another Covid variant, at the moment I think that is fairly unlikely,” he said.

“The most likely [catalyst] from my view is that the Fed actually is forced to stop giving a double message and starts having to talk quite seriously about the days of additional monetary stimulus and financing of budget deficits [being] over,” he said.

Roche suggested the spread of the delta variant was unlikely to be the trigger for pent-up consumer savings to be withheld and for markets to pull back.

“With regards fiscal stimulus, the likelihood is that the combination of excess savings in both the housing sector and in the corporate sector, plus the fact that there will be more stimulus coming down the line, will keep people fairly optimistic about growth,” he said.