Equities have reached unprecedented valuation levels in the fourth year of a bull market, yet analysts point to resilient earnings growth and moderating inflation as reasons for continued optimism. Market breadth and corporate capital allocation patterns suggest sustained momentum despite elevated metrics.
- S&P 500 reached 5,317 on January 6, 2026, a 148% gain since 2022 low
- Forward P/E of 24.6 is highest in 25 years and exceeds all prior year-four bull market peaks
- Corporate earnings grew at 7.3% annualized over the past 12 months
- Share buybacks totaled $1.2 trillion in 2025, the highest on record
- 78% of S&P 500 stocks above 200-day moving average, a rare breadth indicator
- Nasdaq Composite trades at forward P/E of 31.2, driven by tech sector strength
The S&P 500 Index closed at 5,317 on January 6, 2026, marking a 148% gain since its 2022 low and placing the benchmark at a forward P/E ratio of 24.6—its highest level in 25 years. This valuation surpasses every prior fourth year of a bull market since 1990, including the notable peaks in 1996 and 2005. Despite the historical context, strategists at firms including Goldman Sachs, JPMorgan, and Morgan Stanley maintain overweight positions in equities. The divergence from past cycles lies in earnings performance. Corporate earnings for the S&P 500 have grown at a 7.3% annualized rate over the past 12 months, outpacing the 5.1% average in previous fourth-year bull markets. This resilience is attributed to disciplined cost management, AI-driven productivity gains, and stronger-than-expected pricing power across consumer discretionary and information technology sectors. Market breadth remains robust, with 78% of S&P 500 constituents trading above their 200-day moving averages, a level not seen since 2007. Additionally, share buybacks totaled $1.2 trillion in 2025, the highest annual figure on record, signaling strong balance sheets and confidence in future cash flows. The Nasdaq Composite, driven by a 34% gain in tech stocks, now trades at a forward P/E of 31.2, reflecting investor appetite for high-growth names. Sector rotation has also contributed to stability. Financials and industrials, which typically lag in late-cycle environments, have posted gains of 11.5% and 9.3% respectively in 2025, suggesting broad-based strength. Even with interest rates held at 5.25% and inflation at 2.8% annually, the Federal Reserve’s dovish stance has supported risk assets.