MW The history doesn't look good four years into a bull market. Why these strategists are optimistic anyway.
By Steve Goldstein
Price-to-earnings and profit margins have never been this strong, this late into a cycle
The fourth year in a bull market is not often kind to investors.
The trading desks at major Wall Street banks are not terribly enthusiastic about President Donald Trump's frequent proclamations that are whipsawing markets. Goldman Sachs labelled it "populism vs. capitalism" as JPMorgan suggested investors brush up a new theory of politics called "neo-Royalism" that it thinks best describes the current geopolitical situation.
But one constant bridging both the Biden and Trump administrations is the unrelenting bull market.
Ed Clissold, chief U.S. strategist at Ned Davis Research, calculates the current S&P 500 price-to-earnings ratio (using actual instead of adjusted results) is at 30.8, which has never been higher 39 months into a bull market. The profit margin, where there's admittedly less historical data, has also never been this high this far into a bull market.
Valuations are high this far into a bull market.
And the history doesn't look good. Only two of the previous six bulls survived another year to month 51, he said. The S&P 500 fell by a median of 2.5% over the following 12 months, he added.
All that said, he's still overweight stocks, just "watchful for the risks that have tended to become more acute in the fourth year of a bull market."
In a separate note, Daniel von Ahlen of TS Lombard went further and asked if investors are bullish enough. Look at all the good news: "Around the globe, consensus GDP growth forecasts for this year are still improving, services PMIs look strong across the board, abundant oil supply is pushing crude prices even lower, past rate cuts are still filtering through, world trade volumes are reaching new highs and fiscal policy is stimulative in the four major global economies (U.S., China, Japan, euro area), while soft momentum in U.S. jobs growth is keeping the Fed erring on the dovish side (i.e., the easing bias remains intact)," he says.
Investors, on their indicators of both S&P 500 and Russell 2000, are neutrally positioned, he adds. He suggested being long U.S. cyclical stocks - in the industrial XLI, financial XLF and materials XLB sector - versus staples XLP. He also suggested going short volatility through the ProShares Short VIX Short-Term Futures ETF SVXY.
The markets
U.S. stock market futures (ES00) slipped, following the 0.3% decline for the S&P 500 on Wednesday. Gold and bitcoin fell, while the yield on the 10-year Treasury edged higher.
Key asset performance Last 5d 1m YTD 1y S&P 500 6920.93 1.10% 0.29% 1.10% 16.94% Nasdaq Composite 23,584.27 1.47% -0.04% 1.47% 21.08% 10-year Treasury 4.16 -1.20 -0.10 -1.20 -52.80 Gold 4439 2.47% 3.01% 2.47% 64.86% Oil 56.65 -1.32% -2.19% -1.32% -23.74% Data: MarketWatch. Treasury yields change expressed in basis points
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The buzz
Defense stocks including Lockheed Martin (LMT) and RTX $(RTX)$ rose - one day after stumbling on President Donald Trump's plan to restrict dividends and stock buybacks - as he also said he'd push for a 50% increase in defense spending.
The economics calendar includes weekly jobless claims and the latest readings on the trade deficit and productivity, with consumer credit data set for release at 3 p.m.
Jefferies Financial Group $(JEF)$ results missed on earnings estimates after a $30 million hit on its exposure to bankrupt auto parts supplier First Brands.
Samsung Electronics (KR:005930), in a terse announcement, guided to a record fourth-quarter profit as it benefited from surging memory chip prices.
China's commerce ministry is reviewing Meta Platforms' (META) more-than $2 billion acquisition of Manus, a Singapore-based artificial-intelligence start-up with Chinese founders.
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The chart
This chart from JPMorgan shows the projected fall in tariff rates were the U.S. Supreme Court to strike down the Trump administration's application of levies under the International Emergency Economic Powers Act. The biggest winner would be Dick's Sporting Goods, followed by toy makers Mattel and Hasbro. Keep in mind the White House said it would just implement tariffs under a different authority were the Supreme Court to strike down the tariffs.
Top tickers
Here were the most active stock-market tickers as of 6 a.m. Eastern.
Ticker Security name NVDA Nvidia TSLA Tesla GME GameStop TSM Taiwan Semiconductor Manufacturing Co. PLTR Palantir Technologies MU Micron Technology AMZN Amazon AAPL Apple AMD Advanced Micro Devices SMX SMX (Security Matters)
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-Steve Goldstein
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January 08, 2026 07:32 ET (12:32 GMT)
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