Traders work on the floor of the New York Stock Exchange (NYSE) in New York.
Brendan McDermid | Reuters
Happy birthday to the bull market, which just celebrated its fourth anniversary.
Monday marks the fourth anniversary of the current bull market, with the S&P500 after soaring nearly 120% from its October 12, 2022 closing low – an extraordinary advance that reflects Wall Street’s confidence in the transformative power of artificial intelligence.
Since the release of ChatGPT in late 2022, investors have been hungry for all things AI trading, with the most development-related stocks – the so-called “picks and shovels” – soaring to whole new stratospheres due to the technology.
Nvidiathe poster child of the revolution that was once best known for the graphics cards it made for high-end video games, is now a roughly $5.5 trillion company; it surpassed the $1 trillion market cap for the first time in 2023. Micronic technologyanother beneficiary, surpassed the market capitalization of $1 trillion for the first time last May.
Those moves helped the stock market climb a wall of worry in the years that followed, including in 2026. Last week, the S&P 500 topped 7,800 for the first time and remains near record highs, thanks in large part to its heavy allocation to technology. About 40% of the broader index is made up of technology stocks.
After such an extraordinary run, investors are wondering how much longer the recovery can continue, especially as they face lingering fears about rising inflation, rising bond yields and a more hawkish Federal Reserve.
Technically speaking, the path forward seems less ideal.
According to Oppenheimer’s Ari Wald, the current bull market is the sixth longest of 24 dating back to 1932. Observing the data, the charting analyst wrote that the median time remaining before a cycle reaches its peak is 13 months, suggesting that 2027 could be the final leg of the run.
To be sure, Wald added that the median return over the fifth year was still 21%, suggesting that further gains can be made for investors before any peak.
How long the current cycle can continue could depend on how much the market has deteriorated. In September, 75% of S&P 500 stocks closed in negative territory as the threat of higher interest rates prompted investors to return to a few very large-cap companies.
Small caps, in particular, suffered. Oppenheimer’s Wald said he’s closely watching the Russell 2000 test of its 200-day moving average to see if the bull market still has room to run.
“In our view, relative weakness remains a warning, not an opportunity, until stronger market conditions can be restored,” Wald wrote.
Income is also a problem. Although the third-quarter earnings season is expected to be strong, some worry that they won’t be strong enough to drive the stock price higher, given how high expectations are.
Technology, in particular, is a problem. Deutsche Bank strategist Parag Thatte wrote that he thinks the rotation into technology is now overdone, with the risk-reward ratio no longer appearing favorable.
But many investors remain bullish on the stock market, as its resilience over the past four years reflects strong fundamental earnings amid the development of AI – even if picking winners may prove trickier.
“To outperform, investors need a combination of fast-growing stocks that don’t miss out – which remains our mantra,” Adam Parker, founder of Trivariate Research, wrote on Sunday.
He then added: “We continue to believe that the US stock market will perform well.”
Gn bussni
