U.S. Bull Market Turns 3: Tech-Led Rally Needs Broadening to Sustain Momentum

The U.S. stock market’s current bull run marked its third anniversary on October 12, 2025, with the S&P 500 having surged 83% since its 2022 low and adding approximately $28 trillion in market capitalization. Before a sell-off last Friday, the index had even climbed as much as 88%, and despite the pullback, it still posted a 13% gain over the past 12 months—double the average return for the third year of a bull market, according to CFRA Research. This exceptional performance has intensified the debate between bulls and bears over whether the market has risen too far, too fast.

Historical context adds perspective: Since World War II, there have been 13 U.S. bull markets, seven of which extended into a fourth year with an average cumulative gain of 88%. The current rally has nearly hit that milestone in just three years, pushing the S&P 500’s trailing price-to-earnings ratio to 25x—the highest level ever recorded for the third year of a bull market. “I’ve never seen anything like this,” noted Sam Stovall, chief investment strategist at CFRA and a Wall Street veteran. Valuations look even more stretched by other metrics: the S&P 500’s price-to-sales ratio reached a record 3.23x in early September 2025, while its forward P/E of 22.5x far exceeds the 16.8x average since 2000 .

Stovall warned that 2026 could be challenging, citing “elevated valuation multiples, economic concerns, and the U.S. midterm election year—which typically brings higher volatility from policy uncertainty.” The market got a taste of that volatility last Friday, when the S&P 500 suffered its worst single-day decline since April 10 amid triggering remarks. Additional uncertainties loom, including the Federal Reserve’s rate-cut path—after a 25-basis-point cut in September 2025, officials are divided on whether to trim rates by another 50 basis points by year-end —and the upcoming third-quarter earnings season. Analysts expect S&P 500 earnings to grow 8.8% year-over-year in Q3, down from over 13% in the first half of 2025, with tech leading at 22% but investors wary of AI spending returns . “Given how fast the market has risen, this earnings season could spark volatility if companies voice any growth concerns,” said Louise Goudy Willmering, partner at Crewe Advisors, whose firm is increasing holdings in cheaper international stocks.

A key risk to the bull market is its extreme concentration, driven almost exclusively by tech giants. Nvidia (NVDA.US) has soared nearly 1,500% over three years, while Meta Platforms (META.US) is up more than 450%. This has left most stocks lagging: the S&P 500 equal-weight index, which treats all components equally, has underperformed the market-cap-weighted benchmark by 21 percentage points since October 2022—the largest such gap at this stage of a bull market since the 1990s. Historically, the equal-weight index has outperformed the main index by an average of 24 percentage points by the third year of subsequent bull runs, highlighting the current anomaly.

Jurrien Timmer, global macro director at Fidelity Investments, explained the unusual dynamic: “Bull markets typically see broad participation early on, as the Fed cuts rates to support the economy. This time was the opposite—2022 rate hikes to curb inflation pushed concentration to extreme levels.” The so-called “Magnificent 7” tech giants now account for a record 34% of the S&P 500’s total market value, according to Morningstar, compared to just 23% for the top 10 companies during the dot-com bubble. Including three more giants (Broadcom, Berkshire Hathaway, and JPMorgan Chase), the top 10 firms make up nearly 40% of the index, creating what the Daily Mail called a “dangerously unbalanced state” where the entire benchmark rises or falls with a handful of stocks.

Yet prominent bull Jim Paulsen downplays bearish fears, noting that few professional investors anticipate a market crash “because the Fed will likely intervene if conditions deteriorate.” He expects market breadth to gradually expand to equal-weight stocks and small-caps, adding, “There may be some twists and turns after three years of outperformance, but don’t fight the Fed or the market trend.” The Fed’s September rate cut and potential for more easing have reinforced this confidence, even as officials remain split on the pace.

As the S&P 500 posts back-to-back annual gains of over 20% for the first time since the late 1990s, some investors are rebalancing portfolios. “Now is the time to rebalance,” said Patrick Fruzzetti, portfolio manager at Rose Advisors, who is reducing tech exposure and buying undervalued healthcare stocks. “If you’ve profited heavily from large tech over the past few years, shifting to sectors that will benefit from rate cuts makes sense.”

Bulls still lean on historical precedent: Since WWII, bull markets have lasted an average of 4.6 years with cumulative returns of ~157%, leaving room for further gains—especially for sectors outside tech. Timmer acknowledged, “There’s no sign the market is in the danger zone yet. The bigger risks are if yields climb back toward 5%, forcing a valuation reset, or if the AI boom turns into a bubble triggering a major sell-off. That’s why broadening participation is crucial from here.”

With Q3 earnings season kicking off—bank stocks lead off, with JPMorgan and Goldman Sachs reporting this week —and AI spending under scrutiny, the market’s ability to “broaden its rally” will determine whether the three-year bull run can extend into a fourth. For now, the 83% gain and near-$90 trillion S&P 500 market cap reflect confidence in tech’s leadership, but as Timmer’s warning suggests, the rally’s next chapter depends on moving beyond the “tech solo show” to a more inclusive performance.