Bull Market Opportunities: Don't Wait for the Other Shoe to Drop
Key Takeaways
Don’t let recent history dissuade you from sticking to your plan.
Despite negativity bias and market fears, U.S. equities have posted three straight years of strong double-digit gains through 2025.
Historical bull markets (e.g., 1982–1989, 1995–1999) show multi-year runs are normal when economic fundamentals remain solid, staying invested matters.
How often has this happened to you?
Your favorite sports team is on a roll, or you’re raking in the chips at your neighborhood poker game, or you’ve had seven straight days of sunny, beautiful weather. Do you celebrate? No? Your mind convinces you that the end of your run is just around the corner. Behavioral finance calls this “negativity bias” – it’s part of our natural survival instinct.
I bring this up because on top of the war in Iran, sky high gas prices and stubborn inflation, the stock market is at its all-time high (again) as we go live with this article. In fact, the market has been on an incredible roll the past three-and-a-half years. U.S. equities chalked up a 16% gain in 2025 on top of +23% in 2024 and +24% in 2023. Surely, in 2026 we’d be due for a correction, as many pundits warned us at the beginning of the year.
So why didn’t any of the 21 analysts surveyed by Bloomberg recently predict a down market in 2026? I’m not suggesting they’re all right, but they’re interpreting the facts at hand; they’re not speculating against the house the way sports bettors and casino gamblers do.
Here are some facts to support the extended bull case.
The “One Big Beautiful Bill" is expected to hit full stride in 2026. It includes a number of tax breaks for both businesses and consumers that should stimulate the economy.
The S&P 500 ended 2025 with a 12.1% increase in earnings per share, according to FactSet. Analysts are projecting that S&P 500 earnings will grow to an even better 14.5% in 2026. Both years exceed the 10-year average annual increase of 8.6%.
Small cap bargains. The small-cap premium has returned to the market, and cyclical stocks are outperforming mega stocks as investors rotate away from the mega-cap technology. This has improved overall market breadth which gives more meaning to the word diversification.
The long-anticipated U.S. recession hasn’t materialized. U.S. real GDP grew at an annual rate of +2.0% in Q1 2026 following a +0.5% growth rate in Q4 2025. That’s not exactly a booming economy, but far from two consecutive negative quarters that traditionally defines a recession. We’re avoiding a recession primarily due to massive investment in AI, resilient consumer spending, and a stable labor market that is experiencing a "hiring recession" or "jobless boom" rather than mass layoffs. Strong corporate profits, government infrastructure spending, and the U.S. being a net oil exporter have also provided stability.
Supply-Side Normalization. Global supply chains continued to normalize after prior disruptions, reducing cost-push inflation. This has eased volatility and returned the yield curves to a normal distribution, both suggesting improved market functioning and lower stress.
If that’s not enough evidence to support sticking to your plan when everyone else is screaming “duck and cover,” just know that multi-year bull markets like we’re currently enjoying are not as rare as you might think.
Between 1995-1999 the markets posted five straight years of double-digit gains for a cumulative rise of over 91%. Sure, there was dot-com/Internet speculation (somewhat like AI today), but there was also favorable monetary policy driven by low interest rates and strong economic fundamentals (low unemployment, low inflation, rising corporate profits and strong real GDP).
Between 1982-1989 we saw eight straight years of positive gains amounting to a 200% gain for disciplined investors. This cycle was driven by a successful effort to tame high inflation, significant pro-growth economic policies (including tax cuts and deregulation), and major technological advancements. In fact, for the 12 years between 1978 and 1989 there was only one down year, and the markets returned over 262% to investors who stayed the course during that time period.
The post-War era (1949-1952) saw four straight years of double-digit gains for a cumulative return of +75% to investors who stayed the course. This cycle was driven by the powerful post-World War II economic boom, a surge in consumerism, American industrial dominance, and the return of public investor confidence, a surge of foreign investment and a favorable political/regulatory environment.
During each extended bull run, if you followed your instinct and rushed to the sidelines after the first two or three great years, you would have missed out on massive returns and possibly never recovered. Again, there was plenty of speculation and exuberance during these “winning streaks,” but the economy was generally solid and company earning were strong. So, by historical standards a three-year extended bull run is not necessarily long in the tooth as long as the fundamentals remain in place.
How much left in this bull market?
Nobody knows for sure, and there are plenty of factors that could derail it. Markets are the product of the human mind, which is too complex and too emotional to be predictable. No AI tool or algorithm can solve the puzzle.
What we can do for you is look for patterns from the past that might fit the current situation and then build a contingency plan around the possible outcomes. This much we know, nobody likes seeing their account balances drop, regardless of the reason. It’s our job to counsel you through the scary early days of a downturn and prevent you from making hasty emotional decisions that cause long-term damage to your financial plan.
The most powerful tool is diversification, not just across different stocks and sectors, but across asset classes and countries. As Novi clients know, we stress-test each client’s portfolio regularly to ensure it will hold up even during periods of extreme volatility or a downturn.
If you are retired or close to retiring, only make “bets” on what you can afford to see go down. Second, start planning for income distributions. TIPS, short term ultras and Treasurys are not a bad place to be for income right now.
Concerns
Like fans of the NFL Kansas City Chiefs and University of Alabama football team, investors have gotten out of practice with losses, and it can be a painful adjustment as we saw during tariff Liberation Day a year ago, or the outset of the U.S. Iran hostilities earlier this year. Also, market breadth has weakened even though the S&P has stayed strong. Earlier this year, when the S&P 500 hit one of its recent record highs, only 104 of 500 stocks were up, the worst breadth ever recorded for an up day.
Further, the Shiller CAPE Index should give everyone pause.
The Shiller CAPE ratio (Cyclically Adjusted Price‑to‑Earnings ratio) uses a 10-year rolling average to smooth out business cycles and distortions caused by single‑year earnings spikes or recessions. It recently hit 40.38, one if its highest readings ever and far above its long‑term historical average around 16–17. No indicator is 100% reliable, but every time Shiller CAPE has exceeded 30 a crash has eventually followed. That said, it can take years before a crash occurs. A high CAPE suggests lower long-term returns ahead. A CAPE ratio above 30 has historically led to just 0% to 3% annualized real returns over the following decade. When share prices are irrationally high, future gains are already priced in in expectation of future earnings growth, leaving less upside.
Conclusion
Don’t let a recent run of good or bad fortune take you away from your long-term plan. Keep your eyes on the front windshield not the rearview mirror. If you or someone close to you has concerns about their retirement readiness or asset allocation. Please don’t hesitate to reach out. I’m happy to assist. Bull Market Opportunities
Robert B. Dunn, CFP® is the President and Managing Partner of Novi Wealth
