"We're very ahead of ourselves … We're not calling the top by the end of this year. It could easily run into January. [With] these anticipatory rallies, eventually people do get in, but then you only grind higher. Then it takes only a little bit of bad news, and then everyone wants to take profits at the same time," said Christopher. He added Wells Fargo expects the S&P 500 to end next year between 2,230 and 2,330.
The aftermath of the Fed's rate hike and revised forecast for three rate hikes next year (as opposed to the two hikes that were forecast earlier) could also continue to be a factor. The Fed announcement sent the dollar sharply higher this past week, to a 14-year high, and interest rates spiked after the Wednesday announcement. Yields settled down by Friday, and the 10-year was yielding 2.57 percent in afternoon trading.
Stocks have been rallying on President-elect Donald Trump's promises of government spending, slashed regulations and tax cuts. Anticipation about those promised tax cuts, however, could be supporting stocks only temporarily and cause selling next year.
"I think we've gotten an early Christmas. I think really what we've already seen can be regarded as the Santa rally. We could still see more [gains] — not surprisingly, because who wants to sell out and guarantee they see a higher tax rate than if they sold next year?" said Sam Stovall, chief investment strategist with research firm CFRA.
Stovall said the market, by some measures, has gone too far, but it's not likely to sell off just yet. "There's enough hope and anxious uncertainty that will not be resolved until well into 2017, combined with the desire to avoid paying higher taxes. Those factors will keep the market elevated," he said.
Stovall noted that the cyclical sectors — stocks such as consumer-goods makers, whose price is affected by the performance of the wider economy — started doing well before Trump won the election. They normally perform better than the broader markets in November through April.