As investors navigate complex market terrain, it’s essential to remember that bull markets tend to outlast bears and often defy expectations.
The current rally, now approaching its third anniversary, has delivered remarkable gains despite political uncertainties, high valuations, and episodic volatility. By focusing on transformative trends, robust earnings, and strategic diversification, market participants can harness optimism in action and build resilient portfolios.
The modern bull run began in early 2023 and has since produced a near 93.4% total gain through late 2025, translating to an annualized return of approximately 23%. This performance places the current cycle just outside the top ten three-year rallies since World War II.
Historically, U.S. bull markets last longer than bear markets, with average durations around 4.5 years versus 1.5 years for downturns. The deepest drawdown to date was a 19% decline between February and April 2025, a correction that served to reset valuations rather than derail the broader advance.
In mid-2025, a 1.2% drop in the S&P 500 and over 2% slide in the Nasdaq amid the longest government shutdown on record tested investor confidence. Yet the market swiftly rebounded, chalking up a 15.7% year-to-date return including dividends by late 2025.
Broad participation—evidenced by mid- and small-caps narrowing the gap post-Fed cuts—underscores strong and broadening sector participation. Leadership has shifted beyond mega-caps, reflecting renewed interest in cyclicals, utilities, and industrials.
At the heart of the rally is a wave of corporate investment in AI compute and services. The technology sector delivered a 25.3% return in 2025 and 178.2% over the past three years, while Communication Services returned 23.2% and 161.0% respectively.
Despite forward P/E ratios near 30x, valuations remain justified when compared to the 70x+ peaks of the 1999 dot-com era. Analysts predict AI CapEx will boost global growth over the next five years, with tech giants reporting robust balance sheets and cash flows.
Fundamentals have underpinned the rally. S&P 500 earnings per share are projected to grow 10% in 2025 and at least 7.5% in 2026, outpacing historical averages. Numerous firms have surpassed consensus earnings expectations, driving upward revisions and validating rich market multiples.
Valuations rarely correct on price multiples alone; they realign when profit growth disappoints. To date, earnings trends support current levels, and market returns remain more correlated with earnings changes than with raw P/E ratios.
The rally’s breadth improved as Utilities returned 22.2% and Industrials 17.6% in 2025, with Financials reaching new highs by September and Consumer Discretionary and Health Care surging later in the year.
Policymakers have reinforced this momentum. The “One Big Beautiful Bill Act” extended key tax provisions, raised the debt ceiling, and provided $150 billion in consumer rebates through 2026. Combined with a cumulative 1.0% in 2024 rate cuts and further easing in 2025, these measures sustained resilient consumer spending and solid growth.
Every bull run carries inherent risks. Political shifts, tariff tensions, inflation pressures, and the pace of AI spending could introduce volatility. Yet volatility is not necessarily the enemy of returns when managed thoughtfully.
To position for continued gains, investors should consider a balanced approach that emphasizes long-term trends, prudent risk management, and portfolio resilience.
By combining growth themes with defensive anchors, investors can harness market momentum without succumbing to euphoria. Frequent portfolio reviews and disciplined rebalancing help capture gains and control risk.
Ultimately, the bull market remains intact, fueled by innovation, earnings growth, and policy support. Patience, conviction, and strategic diversification will allow market participants to benefit from ongoing upside while guarding against unforeseen shocks.
Embrace the opportunity presented by this remarkable cycle. With an informed, optimistic mindset and a well-crafted investment plan, you can navigate uncertainty and participate in what may become one of the most enduring and rewarding bull markets in modern history.
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