Current Bull Market Celebrates Four Years with S&P 500 Surge
- The bull market has now reached its fourth anniversary, with the S&P 500 up nearly 120% since October 2022.
- Key beneficiaries include Nvidia and Micron Technology, both of which surpassed a $1 trillion market cap this year.
- Despite high expectations, market breadth is weakening, raising concerns about the sustainability of the rally.
The current bull market celebrated its fourth anniversary on Monday, marked by a remarkable nearly 120% climb in the S&P 500 since its closing low on October 12, 2022. This growth is a testament to Wall Street’s confidence in the transformative potential of artificial intelligence.
The release of ChatGPT in late 2022 has fueled investor enthusiasm for AI-related stocks, particularly those providing essential components for AI technologies, often referred to as “picks and shovels.” Nvidia, a leader in this sector, has surged to a valuation of approximately $5.5 trillion, crossing the coveted $1 trillion market cap milestone for the first time in 2023. In a similar trajectory, Micron Technology achieved its first $1 trillion market cap this May.
These developments have driven the stock market to navigate through various economic challenges over the past years, including in 2026. Recently, the S&P 500 reached a new high, surpassing 7,800 for the first time, thanks in large part to a significant allocation towards technology stocks, which make up about 40% of the broader index.
Despite the impressive performance, investors are questioning the longevity of the rally amid ongoing concerns about rising inflation, increasing bond yields, and a more aggressive Federal Reserve. Oppenheimer’s Ari Wald indicates that the current bull market ranks as the sixth longest since 1932, with a typical cycle peaking around 13 months post-intervention, suggesting 2027 may mark the culmination of this upward trend. However, he also noted that the median return in the fifth year remains at 21%, indicating potential for further gains.
The sustainability of the market rally may hinge on market breadth, which has recently declined. Notably, 75% of S&P 500 stocks closed in negative territory in September, prompting investors to concentrate on a handful of mega-cap companies. Small-cap stocks have notably struggled, with Wald monitoring the Russell 2000’s performance against its 200-day moving average to assess the bull market’s resilience.
Wald warned that current relative weakness signifies caution rather than opportunity until favorable market conditions re-emerge. Additionally, while third-quarter earnings reports are anticipated to be strong, there is concern that they may not meet elevated expectations, particularly within the tech sector. Deutsche Bank strategist Parag Thatte remarked that the recent shift into tech stocks appears excessive, leading to an unfavorable risk-reward scenario.
Nonetheless, a significant number of investors maintain an optimistic outlook on the market’s future, citing strong fundamental earnings linked to the AI boom, even if selecting successful stocks becomes more challenging. Adam Parker, the founder of Trivariate Research, reiterated the necessity for investors to choose high-growth stocks that consistently meet expectations, asserting a consistent belief that the U.S. stock market will continue to perform well.
News Courtesy of CNBC
