The current bull market turned four on Oct. 12, with the S&P 500 up nearly 120% since its 2022 closing low. Investors now weigh higher bond yields, oil and a more hawkish Federal Reserve against the strength of the AI-driven rally.
The S&P 500 has climbed nearly 120% since its closing low on Oct. 12, 2022, marking the fourth anniversary of the current bull market on Monday. The run reflects Wall Street's faith in artificial intelligence, but investors question how long it can last.
AI stocks drive the index higher
Enthusiasm for AI began after the release of ChatGPT in late 2022. Nvidia is now a roughly $5.5 trillion company, after it passed the $1 trillion market cap for the first time in 2023. Micron Technology passed $1 trillion for the first time this May.
The S&P 500 topped 7,800 for the first time last week and remains near records, helped by its heavy allocation toward tech. About 40% of the index is in tech stocks.
Oppenheimer flags a maturing cycle
However, the technical picture appears less ideal. Oppenheimer chart analyst Ari Wald wrote that the current bull market is the sixth longest of 24 going back to 1932. The median time remaining before a cycle peaked was 13 months, which suggests 2027 could be the final leg.
Still, Wald added that the median fifth-year return was 21%, pointing to possible further gains before any peak.
Breadth and earnings raise questions
Market breadth has deteriorated. In September, 75% of S&P 500 stocks closed in negative territory as the threat of higher interest rates pushed investors back into a few mega-cap companies. Wald said he is watching the Russell 2000's test of its 200-day moving average to see whether the bull market still has room to run.
Deutsche Bank strategist Parag Thatte wrote that the rotation into tech looks overdone, with the risk-reward no longer favorable. Some investors also worry that third-quarter earnings may not be strong enough to lift stock prices, given how high expectations have grown.
Others stay optimistic. Adam Parker of Trivariate Research wrote on Sunday: "We continue to think that the US stock market will perform well."
Source: CNBC
Trading involves risk.
Risk Disclaimer
