Traders work on the floor of the New York Stock Exchange (NYSE) in New York City.
Brendan McDiarmid | Reuters
Happy 4th birthday to the bull market.
Monday marks the fourth anniversary of the current bull market. S&P500 It’s up nearly 120% from its closing low on October 12, 2022, an extraordinary rally 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 everything related to AI trading, and the stocks most involved in its construction, the so-called “picks and shovels”, are rocketing into a whole new stratosphere due to the technology.
Nvidiaa revolutionary symbol once best known for the graphics cards it developed for high-end video games, is now a roughly $5.5 trillion company. In 2023, the market capitalization will exceed $1 trillion for the first time. micron technologyAnother beneficiary, the company, surpassed the $1 trillion market cap for the first time in May of this year.
These moves helped the stock market overcome the wall of uncertainty in subsequent years, including in 2026. The S&P 500 index topped 7,800 for the first time just last week and remains at near-record levels thanks to a heavy allocation to tech. About 40% of the broader index is made up of tech stocks.
After such an extraordinary rally, investors are wondering how long the bull market will last, especially in the face of rising inflation, soaring bond yields and continued concerns about a hawkish Federal Reserve.
Technically speaking, the path forward seems less ideal.
The current bull market is the sixth longest of the 24 years dating back to 1932, according to Oppenheimer’s Ari Wald. Chart analysts looking at the data note that the median time remaining until the cycle peaks is 13 months, suggesting 2027 could be its final stage.
Indeed, the median five-year return is still 21%, suggesting there could be more gains for investors before the peak, Wald added.
How long the current cycle lasts may depend on the breadth of the deteriorating market. In September, 75% of the S&P 500 ended in negative territory as the threat of rising interest rates drove investors back to a few mega-cap companies.
Small-cap stocks are particularly struggling. Oppenheimer’s Wald said he is closely watching the test of the Russell 2000’s 200-day moving average to see if there is still room for the bull market to run.
“In our view, the relative weakness remains a warning rather than an opportunity until stronger market conditions are re-established,” Wald wrote.
Earnings is also an issue. The third-quarter earnings season is expected to be strong, but some are concerned that there won’t be enough momentum to push up stock prices given the heightened expectations.
Technology is especially an issue. Parag Zatte, a strategist at Deutsche Bank, wrote that he believes the shift to technology has gone too far as the risk-reward relationship is no longer favorable.
However, the stock market’s resilience over the past four years reflects solid underlying returns amid developments in AI, so while many investors remain optimistic about the stock market, picking winners may become more difficult.
Adam Parker, founder of Trivariate Research, said on Sunday: “For investors to outperform, they need a combination of fast-growing and can’t-miss stocks. This remains our belief.”
He later added, “We continue to believe that the U.S. stock market will perform well.”
