The US stock market's bull run reaches its fourth anniversary on Monday, October 12. Reuters reports that the S&P 500 is trading near record highs, with corporate profits and AI spending powering the advance. At the same time, strategists say the rally is unusually narrow, which raises the stakes if the AI trade stumbles.

The Run by the Numbers

  • Gain: the S&P 500 is up about 117% from its closing low on October 12, 2022.
  • Ranking: Carson Group's Ryan Detrick calls it the sixth-best bull market since World War II. CFRA's data going back to 1947 puts it third among bull markets at the four-year mark. The two figures use different measures.
  • Level: the index trades within striking distance of 8,000.
  • Earnings: S&P 500 earnings are expected to rise more than 35% this year, helped by hyperscaler spending on data centers.

Why the Rally Is Called Narrow

  • Equal-weight gap: an equal-weighted S&P 500 has trailed the standard index by 52 percentage points since October 2022. Bloomberg data show this is the widest gap at this stage of a bull market since at least the 1990s.
  • Concentration: the top 10 companies now make up about 40% of the S&P 500, up from about 28% in October 2022, according to J.P. Morgan Asset Management.
  • Sector leadership: technology and communication services are the only sectors to beat the index during the run.
  • Trillion-dollar club: 13 US companies are valued at $1 trillion or more, and all but two are in tech or have heavy AI exposure.

What Strategists Are Saying

CFRA's Sam Stovall expects the bull market to continue, but says he worries about how narrow the rally is compared with history. He says the outcome will hinge on profit growth and corporate outlooks. Edward Jones strategist Angelo Kourkafas says the concentration reflects fundamental strength and earnings outperformance, while also adding risk. Ed Yardeni projects the S&P 500 could reach 10,000 by the end of the decade.

Risks to Watch

  • AI dependence: any hint of weakness in the AI trend could be met with a harsh reaction.
  • Fed hikes: the Federal Reserve has raised rates and officials expect another increase by year-end.
  • Treasury yields: spiking yields could weigh on stock valuations.
  • Midterm elections: markets could be volatile heading into next month's vote.

Is Four Years "Old"?

Not necessarily. CFRA data show that when past rallies extended into a fifth year, the average gain was 21%. Age alone has not signalled the end of a bull market, and what happens next depends on whether earnings can keep up with expectations.

Key Takeaways

  • The S&P 500 is up 117% since October 2022, led by AI-related companies.
  • The rally is the narrowest at this stage since at least the 1990s.
  • Rate hikes, rising yields and AI expectations are the main risks.