How Long Can the US Stock Bull Market Last? Historical Data Reveals Key Signals for 2025 Trends

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The US stock market has shown strong upward momentum. The S&P 500 Index has continued to climb from May to November 2025, repeatedly setting new historical records, with the market filled with optimistic sentiment.

However, the economic fundamentals present a different picture. Data shows that GDP growth expectations are slowing, while the unemployment rate is expected to rise gradually, suggesting the economy is cooling.

This stark divergence between market performance and economic data poses a core question for investors: How long can the current bull market sustain?

Key Takeaways

• US stocks are now highly valued, which may mean reduced future returns.
• Artificial intelligence (AI) technology is driving market gains, but economic slowdown could bring risks.
• The US stock market in 2025 may not rise continuously; it will fluctuate between optimism and concerns.
• Investors should diversify, manage risks, and select companies with strong fundamentals.
• Focusing on corporate earnings, economic data, and market sentiment can help investors make better decisions.

Historical Perspective: Warnings from Current Valuations and Sentiment

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History often repeats itself, and the current bull market is not without warning signals. From the perspectives of valuation and market sentiment, some concerning signs have already emerged.

Divergence Between Drivers and Fundamentals

The disconnect between market performance and economic fundamentals is becoming more pronounced. Data shows that US stock returns have far exceeded corporate earnings growth.

Despite corporate management sentiment dropping to a 15-year low (excluding the pandemic period), indicating caution about the future, the stock market continues to rise. Since November 2022, the S&P 500 Index has risen nearly 80%, while job vacancies have declined by about 33% over the same period. This divergence suggests that current stock prices may be driven more by market sentiment than solid fundamentals.

Mean Reversion Pressure Under High Valuations

Historical experience shows that stock markets often enter a period of low returns after long-term high returns. Currently, multiple valuation indicators have flashed red lights, signaling accumulating mean reversion pressure.

The famous “Buffett Indicator” (total market capitalization to GDP ratio) is a key tool for measuring market valuation. As of September 2025, this indicator has reached an astonishing 230%, far above the historical trend line, indicating the US stock market is in a “strongly overvalued” state.

In addition, the price-to-sales ratio (P/S Ratio) has also reached historical highs. In November 2025, the S&P 500 Index’s price-to-sales ratio reached as high as 3.39, comparable to the peak levels during the 2000 dot-com bubble, further heightening market concerns about valuation bubbles.

Extreme Optimism Among Retail Investors

As a contrarian indicator for the market, extreme optimism among retail investors is often one of the signals of a market top. According to the American Association of Individual Investors (AAII) sentiment survey:

• As of early December 2025, bullish sentiment has climbed to 44.3%.
• This figure is significantly higher than the historical average of 37.5%.

This widespread optimism, combined with record-high valuations, evokes memories of Greenspan’s warning of “irrational exuberance.” When market participants generally expect rises, risks often accumulate quietly.

2025 Outlook: Intense Battle Between Bull and Bear Factors

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Although historical valuations have sounded the alarm for the market, looking ahead to 2025, the US stock market does not face only unidirectional downside risks. Investors are at a crossroads where bull and bear factors are fiercely competing, and the future path will be determined by the outcome of several key forces.

Optimistic Reasons for Bull Market Continuation

Optimists believe the current bull market is built on a solid foundation of technological revolution, with its momentum far from exhausted. The booming development of artificial intelligence (AI) is the core engine supporting continued market upside.

Continued Deepening of the AI Revolution

Artificial intelligence is moving from concept to large-scale application, with progress in speed and breadth beyond imagination. These advancements bring real growth drivers to related companies.

• Performance Leaps: AI models continue to achieve breakthroughs in various rigorous benchmark tests, demonstrating the ability to solve more complex problems.
• Application Popularization: AI is accelerating integration into various industries, from FDA-approved AI medical diagnostic devices, to increasingly popular autonomous driving technology, to AI-driven cybersecurity solutions, with new growth points emerging constantly.
• Cost Effectiveness: Technological progress has significantly reduced the development and usage costs of AI. For example, inference costs for GPT-3.5 level models have dropped significantly, and the performance gap between open-source and closed-source models is narrowing, greatly promoting the popularization of AI technology.
• Energy Demand: AI’s enormous energy consumption in turn drives massive investment in power infrastructure and sustainable energy, opening up entirely new growth tracks.

In addition to technology drivers, some market analysis institutions have given extremely optimistic forecasts. Economists at Capital Economics believe the US stock market is poised for a third consecutive year of over 20% gains. Their confidence mainly comes from:

• Undiminished AI Investment Enthusiasm: Continued frenzy over AI will keep pushing up valuations of tech giants and drive the overall market higher.
• Room for Valuations: Analysts point out that current US stock price-to-earnings ratios are still far below peak levels during the 2000 dot-com bubble.
• Relative Strength of US Economy: The US economy is expected to continue outperforming other developed economies in 2025, supporting corporate earnings expectations.

Potential Macroeconomic Headwinds

However, the market’s upward path is not smooth sailing. A series of macroeconomic uncertainties constitute potential headwinds that could impact the high-running market at any time.

1. Stubbornness of Inflation and Interest Rate Path

Inflation is the Sword of Damocles hanging over the market. Although the Fed has signaled rate cuts, the process of inflation cooling may be full of twists.

Stable wage growth, potential fiscal stimulus, and tax cut policies starting in early 2026, could all bring upward pressure to inflation. Although the market generally expects the Fed to begin rate cuts in December 2025, unexpected rebounds in inflation data would seriously disrupt the Fed’s policy rhythm, thereby dampening market sentiment.

2. Economic Cooling and Consumer Weakness

Signs of slowdown in the job market are becoming more evident. Growth in non-farm payrolls continued to slow in 2024, foreshadowing the cooling of the economic engine. At the same time, although consumers still have confidence in the job market, they show concerns about future financial conditions.

• Rising Cost of Living Expectations: Consumers’ expectations for prices over the next year in food, gasoline, medical care, and rent have generally risen, with expected increases in medical costs reaching the highest level in over a decade.
• Worsening Perception of Financial Conditions: The proportion of respondents who believe their financial situation is worse than a year ago is increasing.

Consumption is the pillar of the US economy. Once consumers cut spending due to cost-of-living pressures and uncertainty about the future, corporate earnings will be directly impacted, thereby affecting stock performance.

3. Geopolitical and US Election Uncertainty

In 2025, political factors will become important variables affecting the market. The outcome of the US presidential election will directly influence key policies in taxation, trade, regulation, and immigration.

For example, many provisions in the 2017 Tax Cuts and Jobs Act will expire at the end of 2025. The new government’s decisions on whether to extend these tax cuts, adjust corporate tax rates, and how to handle tariffs on China will bring huge uncertainty to the market. Before the results are clear, risk assets may face pressure.

In addition, global geopolitical conflicts cannot be ignored.

• Russia-Ukraine Conflict: The direction of the conflict and possible ceasefire negotiations will continue to affect energy prices and global supply chains.
• Middle East Situation: Changes in the Syrian situation and Iranian issues may trigger broader regional conflicts, significantly impacting oil markets and risk aversion sentiment.
• US-China Relations: Competition and cooperation between the two major powers, especially gamesmanship on the Taiwan issue, are key to global market stability.

2025 US Stock Market Outlook Scenarios

Combining the above bull and bear factors, the US stock market in 2025 is unlikely to have a unilateral trend, but more likely to present complex movements in the tug-of-war between hope and concern. Major institutions have also given different probability assessments. For example, JPMorgan predicts a 60% chance of economic recession in 2025, while Manulife Investment Management provides a more detailed scenario analysis.

Based on the current competitive landscape, we can deduce the following possible market paths:

1. Bull Market Continuation (Probability 30%): Prerequisite is that AI revolution benefits continue to ferment, with productivity improvements sufficient to offset macroeconomic weakness, while the US economy successfully achieves a “soft landing,” inflation cools mildly, and the Fed smoothly starts a rate cut cycle.
2. High-Level Oscillation (Probability 55%): This is the base case in the eyes of most institutions. The market swings repeatedly between AI-driven optimism and concerns about economic recession. The index may experience quick pullbacks after new highs, overall showing wide-range volatility, with difficulty in sustained unilateral breakthroughs.
3. Mild Correction (Probability 15%): Triggers could be stubbornly unexpected inflation data forcing the Fed to delay or reduce rate cuts; or sharp deterioration in economic data leading to significant earnings declines; or escalation of a geopolitical risk into a “black swan event.” In this scenario, the market may experience a 10%-20% adjustment.

Investment Insights: Identifying Key Signals and Strategy Adjustments

Facing the complex market environment in 2025, investors need to go beyond market noise, identify true trend signals, and adjust investment strategies accordingly. This is no longer an easy-profit unilateral bull market, but a battlefield testing wisdom and patience.

Wall Street Consensus and Core Differences

Currently, Wall Street generally agrees that AI is an important force driving the market, and corporate earnings growth is key to supporting current valuations. However, there are significant differences in core outlooks. The biggest point of divergence is the ultimate path of the US economy—whether it achieves a “soft landing” or slides into recession.

In addition, a fundamental shift is occurring: the once-reliable negative correlation between stocks and bonds has broken down. This means the risk diversification ability of traditional 60/40 portfolios is weakened, and investors face higher overall risk.

Key Signals to Closely Monitor

To navigate the fog, investors should closely watch the following levels of key signals:

• Corporate Earnings Guidance: The next stage of market performance depends on whether companies can continue to deliver strong earnings. Investors need to focus on corporate future guidance during earnings season. Strong performance can reinforce the growth narrative, while any weak signals may foreshadow a market turn. Information technology, industrials, and other sectors are expected to lead growth.
• Macroeconomic Data: Labor market indicators are softening month by month, a direct reflection of economic cooling. At the same time, the yield curve returning to normal after more than a year of inversion is historically often a leading indicator of recession.
• Market Sentiment Indicators: The VIX volatility index (fear index) is at low levels, reflecting investor confidence, but this may also mask potential market complacency, warranting vigilance.

2025 Investment Strategy Outlook

In the current environment, a single investment strategy is difficult to cope with all situations. Investors should adopt a more dynamic and prudent approach to manage assets.

Investors should re-examine their asset allocation plans, using forward-looking methods, focusing on downside risks. A strong diversified portfolio helps reduce risk in volatile US stock markets.

Here are some strategy adjustment directions for reference:

Ultimately, investment success in 2025 will depend on the balance of risk management and asset allocation, rather than blindly chasing highs.

Looking ahead to 2025, the US stock market is not a smooth path, with opportunities and risks coexisting. Although structural positives like artificial intelligence (AI) provide support for the market, high valuations act like gravity, signaling pressure for long-term returns to revert, increasing market vulnerability.

Investors need to abandon the fantasy of “easy money.” In 2025, greater emphasis should be placed on balancing risk management and asset allocation, shifting from blindly chasing highs to selectively investing in assets with solid fundamentals and reasonable valuations, while maintaining strategic flexibility to cope with market volatility.

FAQ

Can AI Positives Continue to Support Stock Prices?

AI is a powerful growth engine, but not omnipotent. Its positives need to translate into sustained corporate earnings. If the macroeconomy significantly deteriorates, AI’s positive impact may also be offset, and investors need to be vigilant about overextension of market sentiment.

Will the US Economy Fall into Recession in 2025?

Major institutions have differing views on this. Signs of economic cooling are evident, but the job market still has resilience. Recession is not inevitable; a more likely scenario is slowed economic growth. Investors should monitor key data changes in inflation and employment.

Does Current High Valuation Mean a Crash is Imminent?

High valuation is an important warning signal, increasing the risk of market correction, but it does not mean an immediate crash. With strong earnings growth support, the market may maintain at high levels for some time. The key is whether companies can deliver on growth expectations.

Facing an Uncertain Market, What Should Investors Do?

Investors should abandon single strategies and shift to more balanced and diversified asset allocation. The focus is on managing downside risks while maintaining certain liquidity to seize opportunities during market pullbacks, selectively investing in assets with solid fundamentals.