As the markets make new highs, some question whether there is still further upside potential. Regardless of the sectors leading the rally and despite soft data, some analysts are confident the answer is yes.

The rallying stock market was being led by defensive stocks, which caused concern for some as it means that investors are prioritizing safety and therefore have a bearish outlook.

"Near term I think the market is waving a caution flag because of the defensive leadership," Terry Sandven, chief equity strategist at US Bank Wealth Management, told Fox Business Network.

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

"The thing that concerns us most is that it is very hard to have a strong market when you're leading with defensive sectors," said Bruce McCain, chief investment strategist at KeyCorp's Key Private Bank.

McCain advises investors to play it safe until cyclicals evolve into the outperformers, according to Fox Business Network.

As the market continues to push higher, that transformation is occurring. Money is now flowing out of defensive sectors, such as utilities and healthcare, and moving into cyclical sectors, such as financials and technology, MarketWatch reported.

This trend is often interpreted as an indication that investors are willing to take on more risk and are therefore more bullish.

However, some believe the sustainability of the rally is now heavily dependent on whether technology becomes the established leader, while others suggest that all the focus on particular sector leadership is overblown.

Dominic Wilson, chief market economist of Global Investment at Goldman Sachs, appears to be among the latter crowd, according to a note he wrote that was obtained by MarketWatch.

"In particular, if non-U.S. growth remained weak, yields might stay lower for longer. In that case, despite a U.S. recovery, it is plausible that the S&P 500 multiple could rise further, potentially pushing the index beyond 2,000. Our conviction that the U.S. market will climb further is thus higher than our conviction about which sectors will lead it there," Wilson wrote.

But the question of growth has raised concern among skeptics. There has been a slew of weak data recently and many worry that this poses risks to the sustainability of the market's rally.

Wilson appears to be of the opinion that there is no need for such concern because investors are not prioritizing strong growth.

"It is mostly about normalization of the U.S. growth recovery in an environment where the spread between yields on equities and the risk-free rate is unusually large. Our central forecasts are that this gap will close from both sides, with equities rising further and bond yields rising gradually too," Wilson noted.

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.