The current US stock market bull run stands at a delicate crossroads. It has weathered aggressive rate hikes, a banking crisis, geopolitical conflicts, and bond market turmoil, yet it remains standing, with a cumulative gain of 131% over four years. However, beneath the seemingly impressive index surface, an unsettling structural fracture is widening — the foundation of the bull market is being supported by fewer and fewer companies.
Since bottoming on October 12, 2022, the S&P 500 has delivered a cumulative total return of 131%, equivalent to an annualized return of approximately 23.3%, roughly three times the historical market average. NVIDIA (NVDA) surged approximately 1,875% during this period, while Meta gained about 488%. Yet according to Ned Davis Research data, the current S&P 500 market breadth — the proportion of index constituents that are rising — has fallen to historic lows, and previously, whenever market breadth diverged from index performance, the S&P 500 often peaked in the following months.
Meanwhile, sustained pressure in the bond market has cast a shadow over the outlook for risk assets. US Treasury yields have risen to a 24-year high. The market's core contradiction is now clear: AI earnings and investment continue to provide growth support, but high interest rates, energy-driven inflation risks, and an extremely concentrated market structure have left virtually no buffer for any disappointment.
AI Wave Dominates the Bull Market, but Breadth Hits Historic Low
The biggest driver of this bull market has always been the market's frenzied bet on artificial intelligence. However, this enthusiasm is accelerating its concentration into a handful of companies.
According to analysis by market research firm The Kobeissi Letter, since the beginning of 2024, 42 AI-related stocks have contributed approximately 67% of the S&P 500's price return — these 42 stocks contributed about 22 percentage points of gains to the index, while the remaining 458 constituents collectively contributed only 11 percentage points.
The concentration problem is worsening further. Apple (AAPL), Microsoft (MSFT), and NVIDIA (NVDA) together currently account for approximately 22% of the S&P 500's total market capitalization, up significantly from about 14% at the end of 2022. At the same time, approximately 84% of current S&P 500 constituents have fallen more than 10% from their respective all-time highs, placing them in technically defined correction territory — a striking data point given that the index itself remains at historic highs.
Nationwide Chief Market Strategist Mark Hackett summarized the situation as "the market's core tension": earnings and AI investment remain strong supports for growth stocks, but high long-end rates, energy-driven inflation risks, and extremely narrow market breadth have left the market with almost no margin for error.
Bull Market "Age" Is Not the Root of Risk
As the bull market enters its fifth year, some investors are beginning to worry about whether it is becoming "long in the tooth." But historical data does not support this assertion.
According to Ned Davis Research statistics, of the 38 bull markets since 1900, 33 lasted shorter than the current one. The average duration of all bull markets is 25 months, with a median of 22 months. At first glance, this data may seem alarming, but MarketWatch columnist Mark Hulbert cited research pointing out that using "age" to predict the end of a bull market is a statistical fallacy — just as assuming that daytime causes nighttime because night follows day.
What truly ends bull markets are recessions (13 of 22 bear markets since 1950 coincided with recessions), excessive investor euphoria (such as the dot-com bubble), or external shocks (such as wars and pandemics). CNBC host Jim Cramer corroborated this from an investor's perspective: "We simply cannot predict which decline will be the real crash, nor can we predict the timing of a rebound. Over four years, we had countless opportunities to flee, but each one would have cost us losses."
A 131% Gain Is Not Unusual in Historical Terms
Has this bull market's gain already climbed too high to sustain? Historical data offers a relatively optimistic answer.
According to MarketWatch, Edward McQuarrie, professor emeritus at Santa Clara University, and William Bernstein, founder of EfficientFrontier.com, compiled rolling four-year total returns for the US stock market on a monthly basis since the late 18th century and found that the current 131% four-year cumulative gain does not constitute a historical outlier — "This happens frequently... it's really nothing, far from historical extremes," the two wrote.
Even extending the view to the March 2009 global financial crisis low, using a 17.5-year statistical period, the US stock market's performance has historically been significantly exceeded on multiple occasions. This means that judging the imminent end of a bull market based solely on the magnitude of gains lacks strong historical evidence.
Interest Rates and Market Breadth: The Most Critical Short-Term Variables
The real risk in the current market may not lie in the bull market's age or magnitude of gains, but in whether interest rate pressure can ease and whether market breadth can be repaired.
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 — after the Fed's hawkish stance strengthened, rate expectations shifted upward, and bond market volatility pushed Treasury yields to 24-year highs, further suppressing the overall outlook for equity assets. He wrote: "If bond volatility can subside more quickly, market breadth will likely catch up with index prices, driving both higher in the near term."
The HSBC multi-asset strategy team holds a similar view. According to an HSBC report, if US economic data show persistently below-expectation signals, it could drag the entire Treasury yield curve lower, thereby supporting valuations across asset classes and facilitating the diffusion and rebalancing of internal drivers within the stock market.
HSBC strategist Max Kettner's team believes that after entering 2027, if a "Goldilocks" combination materializes — steady growth, falling inflation, and declining rates — tech stocks and US corporate earnings may regain strength, but the rally at that point could still be a structurally concentrated market.
The AI Bubble Debate: Divergence Remains, Short-Term Support Persists
Another core debate in the market is whether artificial intelligence investment has entered bubble territory.
The HSBC strategy team takes a clear counterargument. Its report notes that the problem with current AI skepticism is that it looks too far ahead — using highly uncertain revenue forecasts two to three years out to dismiss current price action is not a valid logic.
More important near-term signals include: the pace of free cash flow (FCF) downward revisions for hyperscalers has begun to slow, and expectations for FCF improvement in 2027 are forming; semiconductor and memory companies have recently regained leadership; and computing power prices have stopped falling and are rebounding, exhibiting characteristics of the "Jevons' Paradox" — where efficiency gains actually drive larger-scale demand expansion, constituting a potential positive catalyst for the entire technology sector.
Earnings also provide support. According to FactSet data, a record number of S&P 500 companies have issued positive earnings guidance for the third quarter. Samsung Electronics previously forecast third-quarter operating profit could reach $80 billion, which if realized would set the highest single-quarter profit record in tech company history.
This partly explains why, in an environment of war, elevated interest rates, and economic uncertainty, the index can still maintain historic highs — capital is flowing to where the money is actually being made.
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