Stocks are hot again. But the unpredictable economy could disappoint investors — yet again.

?? Welcome to Trendlines. I’m Larry Edelman , and today I take a look at why stock prices are at record highs.

Plus: Meet the Boston architects who designed the largest cruise ship in the world.

Trendlines is a twice-weekly newsletter by Boston Globe columnist Larry Edelman . Click the subscribe button to keep on top of business and the economy in the region and beyond.

?? The news

The three major US indexes — the Standard & Poor’s 500, Dow Jones industrials, and Nasdaq — each set a record high on Wednesday on news that inflation eased last month .

The gains pushed prices above the March 28 peak and extended a rally that began three-and-a-half weeks ago amid positive corporate earnings reports and renewed confidence that the Federal Reserve would cut interest rates this year .

? But

The path of the post-pandemic economy has been unpredictable. Stock valuations are lofty. Will investors be disappointed yet again?

? Rewind

Investors have been fixated all year on the question of whether inflation would cool enough for the Fed to begin rolling back the 11 rate hikes it made from March 2022 to July 2023.

• Initial hopes for five or six rate cuts faded when last year’s progress on inflation stalled in the first three months of 2024.
• The S&P 500 fell 5.5 percent between March 28 and April 19 amid concern that the Fed would keep borrowing costs higher for longer than investors had expected.

? Positive signs

• The government’s most recent employment report showed moderating hiring growth in April, which the Fed has said is needed for inflation to fall back to its 2 percent target.
• On Wednesday, the government said the Consumer Price Index rose at a 3.6 percent annual rate last month. That was a dip from 3.8 percent in March and the slowest increase since early 2021.

?? Corporate profits

Companies in the S&P 500 are on track to report year-over-year earnings growth of 5.4 percent in the first quarter, according to FactSet .

• If the trend holds, it would be the strongest performance since the second quarter of 2022.

?? Final thought

Stocks are the most expensive they’ve been since the final three months of 2021.

Everything will need to go right — inflation cools, the Fed drops rates, and the economy doesn’t fall into a recession — to justify these prices.

??? Trending

Politics : Wall Street’s big donors are warming to Trump.

Higher Ed : Harvard’s crackdown on the campus Gaza protest violated US labor law, union claims.

Health care : The crisis at Steward Health Care is squeezing other hospitals in Eastern Massachusetts as some patients avoid the bankrupt hospital system.?

?? The Closer

You may never have heard of Boston's Wilson Butler Architects (WBA) , but if you've taken a cruise on Royal Caribbean, you have likely encountered its work. Globe travel writer Christopher Muther explains:

When Wilson Butler Architects was formed in 1997, its specialty was theaters, not creating massive slides on megaships.

But after the firm took an assignment from Royal Caribbean to design a theater for its Voyager of the Seas, a long and fruitful relationship ensued.

Since its first project on Voyager of the Seas, the firm has designed an additional 50 ships for Royal Caribbean, plus Silversea Cruises and Celebrity Cruises, which are owned by Royal Caribbean.

The firm's cruise ship innovations include: the first ice rink, largest slide on a ship, the largest glass dome on a ship, the first skydiving simulator at sea, and the largest, and only, urban park on a ship with more than 30,000 real plants.

Thanks for reading. I’ll be back on Monday. The trend ?? is your friend.

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