NEW YORK — Across the world's economic capitals, from Shanghai to New York, stock markets are trading at record-high levels as investors scarf up equities with an enthusiasm not seen since the late 1990s.

The run on stocks has been anchored by a streak of takeover deals, thriving corporate earnings and an unprecedented amount of share buybacks — a very different scenario from the frenzied buying of tech stocks a decade ago. Investors also are buying because there's plenty of available capital thanks to relatively low interest rates and inflation levels that remain largely in check.

But there's a twist: The U.S., once the leader in the global stock market, has bowed to catalysts abroad that are sustaining the bull run.

"I definitely think overseas markets have been a big part in pushing the U.S. up, even though everyone likes to think we're the leader in the market," said Todd Leone, managing director of equity trading at Cowen & Co. "They've gone much higher than the Dow and S&P, and the fact that the U.S. lags them might make U.S. stocks look cheap. That's been a help."

The Standard & Poor's 500 reached a new closing high of 1,536.34 yesterday, and the Dow Jones industrials also set another closing record. The two indexes have been thriving so far this year but have failed to reach the double-digit percentage gains in many markets abroad.

In Europe, Germany's benchmark DAX index is up about 20 percent this year, and yesterday reached its highest level since 2000. The benchmark Shanghai composite index has led Asia with a more than 50 percent rise since January, and records have been set in Australia, Singapore, Malaysia, Indonesia and New Zealand in recent weeks.

Some investors are starting to ask whether this global rally is justified. The U.S. economy is slowing by all accounts, the Federal Reserve called inflation "uncomfortably high" in the minutes from its last meeting, and consumers continue to wrestle with soaring gasoline prices and a slumping housing market.

And China's stock markets — which former Fed Chairman Alan Greenspan warned could experience a significant pullback — risk becoming an albatross for global investors. Since its markets have ballooned this year, a sharp decline of that nation's two biggest stock markets on Feb. 27 sent shares sliding in Europe, Asia and North America as well.

In the U.S., investors have been able to overlook most of these problems, and for the most part shrug off rumors of a collapse of the subprime mortgage industry.

Credit is also abundant — and has helped fund this acquisition spree — thanks to low interest rates and a global liquidity boom.

Markets abroad are also looking more attractive because the number of shares available in the U.S., while still massive, has been shrinking due to the mergers and acquisitions activity and to an increasing number of stock buybacks.

Last year, S&P 500 companies spent $432 billion on buybacks, more than triple the levels seen at the start of the decade. And there was an estimated $110 billion in the first three months of 2007, the sixth consecutive quarter that buybacks topped $100 billion, S&P data show.

Many observers say these trends show little signs of abating, but all acknowledge that booms don't last forever. There is a widely held belief on Wall Street that — even with all these elements in play — the only way for stocks to keep chugging along is that a modest correction must come so the market can let off steam.

But, how will investors know when this is about to happen? Beware of an overly optimistic mood.

"The party ends when the nervousness goes away," Goldman said. "The worst time to buy stocks is when investors are very comfortable buying them, and right now there is a degree of nervousness and caution."