S&P 500 Enters Fifth Year of Historic Bull Market

The S&P 500 has entered its fifth year as a bull market, the first since World War II to post double-digit advances in each of its first four years. Despite this milestone, the market recently faced a 2% slide as investors questioned whether artificial intelligence demand justifies the high capital expenditures required for network construction. This volatility hit AI-linked firms hard, with CoreWeave plunging more than 25%, while Micron Technology and Advanced Micro Devices dropped 15% and 13%, respectively.

Recent gains in the Nasdaq 100 and S&P 500 indicate a revival in AI trades, though analysts describe a two-tiered earnings market. AI-related companies currently drive 70% to 80% of S&P earnings growth, while nearly half of the index's companies remain negative year-to-date due to high input prices and interest rates.

Market participants are now monitoring the third-quarter earnings season for a potential shift toward healthcare and industrials. While the market is the most expensive since WWII with a forward price-to-earnings ratio of nearly 23, strong earnings growth—tracking for a 29% year-over-year expansion—may justify the valuation. Investors also remain cautious regarding the upcoming midterm elections and their potential impact on deregulation and data center buildouts.