The US bull market approaches its fourth anniversary with the S&P 500 near a record, yet concerns are mounting over its narrow leadership. While the index has advanced 117% since October 2022, a version stripped of market-cap bias has underperformed by 52 percentage points, the widest gap since the 1990s. CFRA's Sam Stovall warns the rally's sustainability depends on Corporate America's profit growth.
Nvidia has surged over 1900% as the AI rally's poster child, driving much of the index's nearly $40 trillion market value increase. However, with so much riding on AI optimism, the setup is vulnerable to swings if sentiment shifts. Bull markets typically broaden participation early on, but this cycle saw forced profit forecasts due to aggressive rate hikes.
Corporate America is navigating strong profit cycles, with the S&P 500 posting seven consecutive quarters of double-digit earnings growth. JPMorgan Chase will kick off the third-quarter earnings season Tuesday, with investors watching for momentum continuation. The US midterm elections in November and the Fed's interest-rate path remain key wild cards.
Perma bull Ed Yardeni projects the S&P 500 could hit 10,000 by decade's end, though he recently cut his year-end forecast to 7,900 citing increased downturn risks. Rising Treasury yields, now at 5.34%, pose a major headwind. Despite risks, the index trades within striking distance of 8,000, supported by robust profits and a strong economy.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing