A Four-Year-Old U.S. Bull Market Faces an AI-and-Yield Test
S&P 500
An index that tracks many large U.S. companies.
Treasury yield
The interest investors receive from a U.S. government bond.
concentration risk
The danger that a few companies can move the whole market.
What happened
The S&P 500, an index tracking 500 large U.S. companies, is nearing its fourth anniversary. This bull market began at a closing low on October 12, 2022. The index was near a record when Reuters reported on October 9. It had gained about 117% from that low. The central question is no longer only whether stocks are rising. It is whether AI spending can keep producing profits while higher yields create pressure. Reuters report and the MarketWatch candidate article describe that tension.
The background: AI became the engine
A bull market commonly means a rise of at least 20% after a decline of at least 20%. This run ranks as the eighth-longest since World War II and the sixth-best by total gain, according to Reuters. ChatGPT, an AI chatbot, launched about one month after the run began. Large cloud companies are spending heavily on data centers. S&P 500 earnings are expected to rise more than 35% this year. Oxford Economics, a research firm, estimates AI accounts for about one-third of recent U.S. economic growth. That estimate includes direct infrastructure spending and a boost from rising wealth.
Why concentration matters
Technology and communication services have beaten the broader index during the run. The top ten S&P 500 companies now make up about 40% of the index. They made up about 28% in October 2022. This is concentration risk: a few companies can move the whole market. Nvidia, a leading AI-chip maker, grew from a $286 billion market value in October 2022 to about $5.8 trillion in the Reuters report. Strong profits could justify that influence. Disappointing AI results could also make declines spread quickly.
Why yields are the warning sign
The Federal Reserve, the U.S. central bank, has been raising rates to fight high inflation. The 10-year Treasury yield was around 5.2% after reaching its highest level in 24 years. A Treasury yield is the return investors receive from a U.S. government bond. Higher yields make bonds more competitive with stocks. They also make future corporate profits worth less in today's calculations. If higher rates slow the economy, companies may face weaker demand and profits. Reuters also warned that markets could become more volatile before the U.S. midterm elections.
What is confirmed
The anniversary itself is not a reliable market timer. A historical review found that all six S&P 500 bull markets since 1957 that reached four years continued past that date. Yet four later fell below their fourth-anniversary level during a bear market. The record supports endurance, not safety. Historical review
What remains uncertain
The biggest unknown is whether today's AI spending will produce enough earnings. Investors must also judge whether high yields will last and how strongly the Federal Reserve responds. The market could keep rising, but a weaker AI outlook or slower economy could expose its concentration.
What to watch next
Watch company earnings, data-center spending, the 10-year yield, and Federal Reserve guidance. Also watch whether gains spread beyond the largest technology names. Four years is a useful milestone. It is not a promise about the next four years.
The U.S. Stock Market Turns Four. AI and Rates Matter Next.
📰 Full story: A Four-Year-Old U.S. Bull Market Faces an AI-and-Yield Test
Stocks have climbed for four years. Now investors are watching AI profits and interest rates.
bull market
A time when stock prices rise for a while.
Treasury yield
The interest paid by a U.S. government bond.
AI spending
Money companies use to build and run AI systems.
💡 The gist
- The S&P 500 tracks 500 large U.S. companies.
- AI spending has helped lift company profits and stock prices.
- Higher Treasury yields could make stocks less attractive.
What is happening?
The S&P 500 has risen since October 12, 2022. Its fourth birthday is arriving near record levels. The market has gained about 117% from its low. But age alone cannot predict a fall. A bull market can continue after four years.
Why does AI matter?
Large cloud companies are building data centers for AI. They are spending huge amounts of money. That spending helps chip makers, builders, and other suppliers. Investors expect the spending to create larger profits later. S&P 500 earnings are expected to rise more than 35% this year.
The risk is simple. AI projects may not earn enough money. If profits disappoint, investors may lower stock prices. The market also depends heavily on a small group of large technology companies. The top ten companies now make up about 40% of the index. They made up about 28% in October 2022.
How do rates affect stocks?
A Treasury yield is the interest from a U.S. government bond. The 10-year Treasury yield was around 5.2%. That was near a 24-year high. Higher yields can make bonds more attractive than stocks. Higher rates can also make borrowing harder for companies.
What should we watch?
Watch AI company earnings, data-center spending, Treasury yields, and Federal Reserve decisions. Also watch whether more companies join the rise. The fourth birthday is important history. It is not a forecast.
Reference: Reuters report
Why Did the Stock Number Rise for Four Years?
📰 Full story: A Four-Year-Old U.S. Bull Market Faces an AI-and-Yield Test
AI may help stocks rise. Higher interest rates may slow them.
S&P 500
A number that follows many big U.S. companies.
AI
Computers doing smart work.
interest rate
Extra money paid when someone borrows money.
What is happening?
The S&P 500 is a number for many big U.S. companies.
It has gone up for about four years.
AI means computers doing smart work.
Companies spend lots of money on AI.
If AI helps profits grow, prices may keep rising.
If profits disappoint, prices may fall.
An interest rate is extra money for borrowing.
Higher rates make borrowing harder.
U.S. government bonds can then pay more interest.
Some people may choose bonds instead.
The four-year birthday is not a magic sign.
No one knows the next move yet.
Reference: Reuters report