Bull market turns four next week. Rallies that make it this far usually keep going

The S&P 500 has risen more than 115% from its Oct. 12, 2022, bear-market closing low and is approaching the bull market’s fourth anniversary. Truist Wealth says bull markets reaching this age have historically averaged a 12% return in year five (median 15%), while year-five maximum drawdowns averaged 14% (median 11%). FactSet analysts forecast Q3 S&P 500 earnings growth of nearly 30% year over year, though the article flags higher energy prices, possible tighter monetary policy and potential cracks in the AI trade as risks.

Analysis

The age of the bull market is a weak timing signal: a small set of surviving cycles cannot establish that year five has positive expected returns, and the cited average drawdown is large enough to erase a year’s typical gain. The more actionable variable is whether earnings delivery broadens beyond the companies carrying index-level growth. If AI-related expectations disappoint while yields and energy costs stay elevated, a narrow group of mega-cap stocks could face simultaneous earnings multiple compression and crowded-flow unwinds; cap-weighted index returns would then understate deterioration beneath the surface. Conversely, broadening earnings revisions would make the rally less dependent on AI and support a more durable advance.

Near term, strong reported results may be insufficient if they merely meet elevated expectations. Over 1–3 months, track Q3 earnings revisions and market breadth alongside real yields and energy prices; over 6–18 months, persistent investment returns from AI spending—not announced capex alone—will determine whether current profit expectations are sustainable. The contrarian read is that historical bull-market longevity is being used as reassurance precisely when macro cross-currents and AI uncertainty warrant tighter risk controls, not an automatic bearish stance. A sustained rise in real yields or energy prices, weakening earnings revisions, or index leadership narrowing further would invalidate the constructive case; broadening revisions and stable rates would weaken the hedge thesis.

Key Decisions for Investors

• Do not add broad equity beta solely on the anniversary or the historical fifth-year return statistic; treat it as descriptive, not a timing edge.
• For existing U.S. equity exposure, consider a defined-risk 1–3 month put spread on the S&P 500 as a tactical hedge rather than an outright short. Size it against portfolio drawdown tolerance; reassess if earnings revisions broaden and real yields stabilize.
• Monitor earnings-revision breadth, equal-weight versus cap-weight performance, and real yields/energy prices. A relative-strength improvement in equal-weight exposure would support rotating some incremental risk away from the most concentrated index exposure.
• Falsify the cautious view if reported Q3 results translate into broad forward-estimate upgrades and market breadth improves without a renewed rise in real yields; reduce or remove the hedge in that case.