Up 131% Over Four Years: Has the U.S. Bull Market Ended?

By Xu Chao, Wallstreetcn

This current U.S. stock market bull run stands at a delicate crossroads. Having survived aggressive rate hikes, banking sector crises, geopolitical conflicts, and bond market turbulence, it has remained resilient, posting a cumulative four-year gain of 131%. Beneath the superficial brilliance of the indices, however, an unsettling structural rift is widening—the foundation of this bull market is being propped up by an increasingly narrow group of companies.

Since hitting bottom on October 12, 2022, the S&P 500 index has delivered a cumulative total return of 131%, equivalent to an annualized return of approximately 23.3%, roughly triple the historical average for the broader market. NVIDIA surged approximately 1875% during this period, while Meta gained about 488%. However, according to Ned Davis Research data, the current S&P 500 market breadth—defined as the proportion of constituent stocks trading above their respective prior closes—is at a historic low. Historically, whenever breadth diverged from price performance, the S&P 500 typically peaked within the following months.

Meanwhile, sustained pressure in the bond market casts a shadow over the outlook for risk assets. U.S. Treasury yields have climbed to their highest level in 24 years. The core contradiction in the market is now clear: AI-driven earnings and investment continue to provide growth support, but high interest rates, energy-driven inflation risks, and an extremely concentrated market structure leave virtually no room for error if expectations go unmet.

AI Surge Drives Bull Market, But Breadth Hits Historic Lows

The primary driver of this bull market has consistently been the market’s fervent bet on artificial intelligence. Yet this momentum is accelerating toward concentration in just a handful of companies.

According to analysis by The Kobeissi Letter, a 42-stock portfolio focused on AI-related names accounted for roughly 67% of the S&P 500 index’s price returns since early 2024. These 42 stocks contributed approximately 22 percentage points to the index’s total gain, while the remaining 458 constituents combined for just 11 percentage points.

Concentration issues are further deteriorating. Apple, Microsoft, and NVIDIA now account for roughly 22% of the S&P 500’s combined market capitalization, a sharp increase from about 14% at the end of 2022. Meanwhile, approximately 84% of the S&P 500’s constituents are currently down more than 10% from their respective all-time highs, placing them in technically defined correction territory—a figure that stands out starkly given that the index itself remains near record levels.

Mark Hackett, Chief U.S. Market Strategist at Nationwide, summarizes this dynamic as “the market’s core tension”: earnings and AI investment remain powerful supports for growth stocks, but high long-end interest rates, energy-driven inflation risks, and drastically narrowed market breadth have left investors with virtually no margin for error.

Bull Market “Age” Is Not the Root of the Risk

As the bull market enters its fifth year, some investors worry it may be showing signs of aging. Historical data, however, does not support this assertion.

According to Ned Davis Research, 33 of the 38 bull markets since 1900 have lasted less time than the current one. The average duration across all bull markets is 25 months, with a median of 22 months. While this might initially seem alarming, MarketWatch columnist Mark Hulbert cites research indicating that predicting a bull market’s end based on its “age” is a statistical fallacy—it is akin to assuming day causes night simply because night follows day.

What actually ends bull markets are economic recessions (13 of the 22 bear markets since 1950 were accompanied by recessions), investor exuberance (as seen in the dot-com bubble), or external shocks (such as wars and pandemics). CNBC host Jim Cramer corroborates this from an investor’s perspective: “We cannot predict which downturn will be the real crash, nor can we time the recovery. We’ve had countless opportunities to exit over the past four years, but each time we would have incurred losses.”

A 131% Gain Is Not Historically Unusual

Has this bull market’s rally become so elevated that it leaves little room for improvement? Historical data offers a relatively optimistic answer.

According to MarketWatch, Edward McQuarrie, Emeritus Professor at Santa Clara University, and William Bernstein, founder of EfficientFrontier.com, compiled rolling four-year total returns for the U.S. equity market dating back to the late 18th century. They found that the current four-year cumulative gain of 131% is far from a historical outlier. “This happens frequently… It doesn’t amount to much. We’re nowhere near historic extremes,” they wrote.

Even when extending the timeframe back to the global financial crisis trough in March 2009 over a 17.5-year window, U.S. equities have historically posted several stretches of significantly stronger performance than today. This indicates that relying solely on the magnitude of gains to forecast a bull market’s imminent end lacks strong historical precedent.

Rates and Market Breadth: The Most Critical Short-Term Variables

The true risk facing the market today may lie not in the bull run’s age or magnitude, but in whether interest rate pressures will ease and whether market breadth can recover.

Morgan Stanley Chief Investment Officer Mike Wilson previously noted that the deterioration in market breadth is closely tied to the Federal Reserve’s hawkish tone. Following a hardening of the Fed’s stance, higher rate expectations spurred volatility in the bond market, pushing Treasury yields to 24-year highs and further capping overall upside for equities. He wrote: “If bond volatility subsides more quickly, market breadth is likely to catch up with index prices, driving both higher in the near term.”

HSBC’s Multi-Asset Strategy team shares a similar outlook. According to an HSBC report, if upcoming U.S. economic data persistently prints below expectations, it could pull down the entire U.S. Treasury yield curve. This would provide valuation support across asset classes and facilitate the diffusion and rebalancing of drivers within the stock market.

HSBC strategist Max Kettner and his team believe that once 2027 arrives, should the “Goldilocks” scenario materialize—characterized by steady growth, declining inflation, and falling interest rates—tech stocks and broader U.S. equity earnings could regain strength. However, any such rally would likely still manifest as a highly concentrated structural advance.

The AI Bubble Debate: Divergence Remains, But Short-Term Support Holds

Another central debate in the market revolves around whether artificial intelligence investment has entered bubble territory.

The HSBC strategy team takes a clear rebuttal stance on this issue. Their report argues that the flaw in current AI skepticism lies in looking too far ahead; dismissing current price action based on highly uncertain revenue forecasts two to three years into the future lacks logical foundation.

More immediate signals include the slowing pace of free cash flow (FCF) revisions for hyperscale cloud operators, with expectations forming for FCF improvement heading into 2027; semiconductor and memory chipmakers recently leading the market higher again; and computing power prices stabilizing and rebounding, exhibiting characteristics of the “Jevons Paradox”—where efficiency gains instead spur larger-scale demand expansion, providing potential positive catalysts for the broader technology sector.

Fundamentals also provide backing. According to FactSet data, a record number of S&P 500 constituents have issued positive third-quarter earnings guidance. Samsung Electronics previously indicated that third-quarter operating profit could reach $80 billion; if achieved, it would set a new record for the highest single-quarter profit in corporate history.

This goes some way to explaining why major indices have managed to hold near record highs amid a backdrop of geopolitical conflict, elevated rates, and economic uncertainty—capital is flowing precisely where real profits are being generated.

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