Is the Logic of the US Bull Market Still Valid? In-Depth Analysis of Current Market Conditions

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Has the US bull market ended? From historical data, since 1950, the average duration of a US bull market is five and a half years, with gains typically reaching 190%. However, the bull market since March 2009 has lasted over a decade, setting a historical record. The growth during this period has benefited from the recovery of corporate profits and a low-interest-rate environment.

Is the logic supporting the US bull market still valid? In the current market, investor sentiment is showing extreme excitement, with retail traders frequently buying call options, and fund managers’ cash allocation has dropped to its lowest level since 2013. These phenomena reflect market participants’ confidence in US stocks while also suggesting the potential risk of overvaluation.

Key Points

• The US bull market has lasted over a decade since 2009, compared to the historical average of five and a half years, demonstrating market resilience.
• Investor sentiment is high, with retail traders frequently buying call options, indicating strong market confidence but also the risk of overvaluation.
• Technology stocks play a significant role in the bull market; despite high valuations, their growth potential attracts significant capital inflows.
• Corporate profitability is closely tied to market expectations, and investors need to monitor industry trends and company financial performance.
• Investors should flexibly adjust their portfolios, diversify risks, and focus on technological innovation and industry hotspots to address market volatility.

Current Market Dynamics and Bull Market Support Factors

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Performance and Trends of Major US Indices

Recently, major US indices have performed strongly, demonstrating market resilience and vitality. Below is the latest statistical data:

These data indicate that the strong performance of technology stocks has driven the Nasdaq’s leading gains, while the S&P 500 and Dow Jones indices have also risen steadily. Improved market sentiment further supports the continuation of the US bull market. The global risk appetite indicator has rebounded from the 9th percentile historically to the 55th percentile, showing increased investor confidence.

Additionally, the probability of a US economic recession has dropped from 66% to 38%, alleviating market concerns about an economic downturn. This economic resilience provides a solid foundation for the US bull market. Historical data shows that when risk appetite rebounds from panic zones, markets typically rise further into “euphoria” zones, suggesting the bull market may continue.

Technology Stock Valuations and Market Leadership

Technology stocks have consistently played a significant role in the US bull market, with valuation levels typically higher than those of traditional industries. Below is a comparison of price-to-earnings (P/E) ratios for technology stocks versus traditional industries:

Technology stocks, due to their growth potential and market expectations, attract significant capital inflows. Despite high P/E ratios, ongoing technological innovation maintains their leadership position in the market. The rebound trend in new consumer and technology growth sectors continues, further solidifying the central role of technology stocks in the US bull market.

However, high valuations also bring potential risks. Investors need to monitor whether technology stocks show signs of a bubble and adjust their strategies based on market dynamics.

Changes in Corporate Profitability and Market Expectations

Changes in corporate profitability directly impact market expectations. Below are the annual revenue and net profit growth rates for selected industries:

The data shows that consumer electronics and logistics industries have higher revenue growth rates, reflecting strong market demand in these sectors. The stability of the US labor market further supports corporate profitability. The number of initial jobless claims for the week ending January 25, 2025, was 207,000, below the expected 225,000, indicating low layoffs and strong economic resilience.

The relationship between market expectations and corporate profitability is also noteworthy. Feature-based predictions are often more accurate than analysts’ consensus forecasts in reflecting companies’ realized earnings. Analysts tend to react slowly when adjusting forecasts, which may lead to valuation biases. Therefore, investors need to combine companies’ historical performance with market conditions to reasonably assess future earnings and ensure fair investment decisions.

Macroeconomic and Monetary Policy Impacts on the Market

The Relationship Between Inflation and Economic Growth

There is a complex relationship between inflation levels and economic growth. Moderate inflation typically accompanies economic growth, but excessively high inflation may weaken consumer purchasing power and suppress economic activity. The following factors significantly influence market trends:

• Changes in the economy’s potential growth rate directly affect GDP growth speed.
• Changes in employment rates reflect the health of the labor market.
• Population aging and changes in labor force size may lead to a reduction in employment, affecting consumption and investment.
• Changes in capital stock and total factor productivity impact the economy’s long-term growth potential.

Recently, US inflation levels have eased, with core CPI growth falling from its peak to 3.7%. This provides room for the Federal Reserve to adjust monetary policy while alleviating market concerns about economic overheating.

Federal Reserve Rate Hikes and Their Market Impact

The Federal Reserve’s rate hike policy has significantly impacted market volatility. Below is the performance of major indices before and after rate hikes:

Global stock market volatility has intensified, particularly for technology stocks and emerging markets. Reduced liquidity has led to rising volatility indicators, with index spreads reaching twice their normal levels over the past two weeks. Goldman Sachs data shows that S&P index futures trading volumes are significantly below the average of the past two years, indicating insufficient market liquidity. This liquidity weakness may further exacerbate market volatility.

Potential Impact of Geopolitical Events on the Market

The impact of geopolitical events on global markets cannot be ignored. Recently, global stock markets experienced significant volatility due to geopolitical tensions:

• On August 2 and August 5, global stock markets experienced “Black Friday” and “Black Monday.”
• Japanese stocks fluctuated sharply due to unexpected rate hikes by the Bank of Japan.
• Multiple indices triggered circuit breakers on August 5.

Nevertheless, as of August 15, Japanese and South Korean stock indices have largely recovered to pre-crash levels. This indicates that the market’s reaction to geopolitical events is short-term, but investors still need to remain vigilant about the potential impact of similar events.

Overall, changes in macroeconomic conditions and monetary policy pose significant challenges to the logic of the US bull market. Investors need to closely monitor inflation, rate hikes, and geopolitical event dynamics to address market uncertainty. Has the US bull market ended? From current data, the market still shows resilience, but potential risks cannot be ignored.

Changes in Investor Sentiment and Capital Flows

Investor Confidence Index and Market Sentiment

The investor confidence index is an important indicator for measuring market sentiment. It integrates data such as market turnover, new account openings, and IPO numbers, reflecting investors’ optimism or pessimism about the market. Below is the relevant statistical data:

The data shows that fluctuations in the investor sentiment index have a significant impact on market performance. Optimistic sentiment typically drives stock market gains, while pessimistic sentiment may exacerbate market declines. Investors need to monitor changes in the sentiment index to better grasp market trends.

Trends in Institutional Capital Flows

Trends in institutional investor capital flows reflect the overall direction of the market. Recent data shows that investor positions have declined, but 48.88% of respondents still believe the bull market persists. Below are specific changes in capital flows:

• Position ratios have declined after market volatility, with investors’ views on future market trends becoming more rational.
• 28.24% of respondents believe the bull market has ended.
• 22.88% of respondents are uncertain.

Institutional investor capital flows are typically forward-looking and provide important reference points for the market. Investors need to closely monitor institutional capital inflows and outflows to gauge potential market trends.

Changes in Retail Investor Behavior

Changes in retail investor behavior significantly impact market sentiment. Below are specific data on retail trading volumes and asset allocation:

The data shows that retail margin balances have decreased from last year’s peak of 1.73 trillion CNY to the current 1.45 trillion CNY, a reduction of about 280 billion CNY. This indicates a reduced risk appetite among retail investors, with asset allocation becoming more conservative. Changes in retail investor behavior may significantly impact market liquidity and volatility.

Predictions and Risk Analysis for the Future of the Bull Market

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Will the US Bull Market Enter a Correction Phase?

Market analysis suggests that the US bull market may enter a correction phase. Historical market data and technical models provide various predictive bases:

• Trendline Analysis: Observing market price changes through trendlines and channels to identify potential correction signals.
• Pattern Analysis: M-top and W-bottom patterns in price charts are often used to predict market turning points.
• Indicator Analysis: Relative Strength Index (RSI) and Stochastic Indicator (KD) reflect overbought or oversold market conditions, providing reference for correction phases.
• Wave Theory: Identifying bull and bear market turning points through wave fluctuations to predict market trends.

Recent market data shows that some technical indicators have entered overbought territory, suggesting short-term correction pressure. Investors need to monitor these signals and adjust strategies based on market dynamics. Nevertheless, market resilience remains strong, and a correction phase may only be a temporary pullback within the bull market, not a complete end.

Potential Risk Factors: Economic Recession, Policy Changes, etc.

The future of the US bull market faces multiple risk factors. Below is an analysis of the main risks:

• Economic Recession Risk: The probability of a US economic recession has significantly increased. Investment banks like Goldman Sachs have advised clients to monitor this trend. While specific probabilities are not yet clear, slowing economic activity may negatively impact corporate profitability and market sentiment.
• Deteriorating Fiscal Conditions: The US Congressional Budget Office reports that the 2024 fiscal year budget deficit exceeds $1.8 trillion. Fiscal pressures may limit the government’s ability to stimulate the economy, further increasing market uncertainty.
• Monetary Policy Adjustment Risk: The Federal Reserve’s rate-cutting decisions rely on shaky data, which may lead to poorly timed policy adjustments, affecting market liquidity and investor confidence.

These risk factors may challenge the logic of the US bull market. Investors need to closely monitor economic data and policy changes to address potential market volatility.

Long-Term Trend Outlook: Technological Innovation and Market Structure Changes

Technological innovation and market structure changes will continue to drive the long-term development of US stocks. Below are the main directions for future trends:

• Technological Innovation Drive: Breakthroughs in artificial intelligence, quantum computing, and renewable energy technologies will provide new growth momentum for technology stocks. Continued development in these areas may attract more capital inflows, reinforcing the market leadership of technology stocks.
• Market Structure Optimization: The internationalization and digitization of capital markets will enhance market efficiency, attracting more global investors to participate in US stock trading.
• Industry Hotspots: Rapid development in healthcare, green energy, and fintech sectors will become key areas for future investment.

Despite potential short-term correction pressures, the long-term trend of the US bull market remains supported by technological innovation and market structure changes. Investors should focus on opportunities in these areas while remaining vigilant about potential risks to achieve stable investment returns.

Investment Recommendations and Strategies

How to Adjust Portfolios to Address Market Volatility

Portfolio adjustments need to consider the characteristics of market volatility and investors’ risk tolerance. Below are some key strategies:

• Diversified Investment: Allocate assets across different classes (e.g., stocks, bonds, gold) to reduce the impact of single-asset volatility on the overall portfolio.
• Dynamic Adjustment: Adjust asset allocation ratios based on market trends and economic cycles. For example, increase the proportion of defensive assets during periods of high market volatility.
• Risk Management: Set stop-loss and take-profit points to avoid losses due to emotional decisions.
• Liquidity Management: Ensure sufficient liquid assets in the portfolio to address sudden funding needs or market changes.

Investors should regularly evaluate portfolio performance and flexibly adjust strategies based on market changes. Through scientific asset allocation, risk and return can be balanced during volatility.

Balancing Long-Term Investment and Short-Term Trading

Long-term investment and short-term trading each have their advantages, and investors need to find a balance based on their goals and market conditions:

• The effectiveness of long-term investment is based on the market’s long-term upward trend. Historical data shows that financial markets generally rise over long economic cycles.
• Despite short-term market volatility, the long-term growth trend is evident.
• Short-term trading is suitable for capturing opportunities in market volatility but requires strong market judgment and execution capabilities.

Investors can adopt the following strategies:

• Core-Satellite Strategy: Allocate most funds to long-term investments (core portion) and a smaller portion to short-term trading (satellite portion).
• Risk Hedging: Use hedging tools (e.g., options or futures) to reduce the risks of short-term trading.
• Regular Evaluation: Periodically analyze the performance of long-term investments and short-term trading to optimize capital allocation ratios.

Through proper planning, investors can balance long-term returns with short-term flexibility.

Focusing on Industry Hotspots and Future Growth Areas

Focusing on industry hotspots and future growth areas helps seize market opportunities. Below are some data sources and market prediction indicators:

Investors can focus on the following areas:

• Technological Innovation: Breakthroughs in artificial intelligence, quantum computing, and renewable energy technologies.
• Green Energy: Rapid development in solar, wind, and energy storage technologies.
• Healthcare: Growing market demand for biotechnology and precision medicine.

By combining data analysis and industry trends, investors can more accurately identify potential opportunities and optimize investment decisions.

Has the US bull market ended? From current market performance, the logic of the bull market still has some support, but potential risks cannot be ignored. Market dynamics, macroeconomic conditions, investor sentiment, and future trends collectively influence the stock market’s direction.

• The macroeconomic environment has a profound impact on the stock market, especially changes in inflation and monetary policy.
• Industry trends directly affect companies’ profitability and market position.
• Companies’ operational conditions and financial performance determine the long-term trend of stock prices.

Investors should formulate flexible investment strategies based on market dynamics and economic data. Diversifying investments, dynamically adjusting asset allocation ratios, and focusing on technological innovation and industry hotspots will help achieve stable returns amid volatility.

FAQ

1. How long do US bull markets typically last?

Historical data shows that the average duration of a US bull market is five and a half years. The longest bull market lasted from 2009 to 2020, over a decade. The duration of a bull market depends on factors such as economic growth, corporate profitability, and market sentiment.

2. How can investors determine if the bull market is entering a correction phase?

Investors can observe market signals through technical indicators (e.g., RSI, KD indicators) and trendlines. Additionally, declining corporate earnings expectations or deteriorating macroeconomic data may signal the onset of a correction phase.

Tip: Monitoring market dynamics and technical analysis tools helps identify correction signals in a timely manner.

3. Does a high valuation of technology stocks mean increased risk?

High valuations of technology stocks typically reflect market expectations for their growth potential. However, high valuations may also indicate bubble risks. Investors need to evaluate the investment value of technology stocks based on company fundamentals and industry trends.

4. How do Federal Reserve rate hikes affect the US bull market?

Federal Reserve rate hikes typically reduce market liquidity and increase corporate financing costs, exerting pressure on the stock market. However, moderate rate hikes may indicate healthy economic growth, boosting market confidence.

5. How should investors address market volatility?

Investors can address market volatility through diversified investments, dynamic asset allocation adjustments, and setting stop-loss points. Long-term investors should focus on fundamentals, while short-term traders need to respond flexibly to market changes.

Recommendation: Regularly evaluate portfolio performance to ensure investment strategies align with the market environment.

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