As of the first week of December 2025, the global bull market in stocks is very much alive, arguably over‑caffeinated, and definitely being watched nervously.
The S&P 500 finished Friday, December 5, around 6,870 points, a fresh weekly gain and just shy of its all‑time closing high set in October. Major U.S. indexes have logged a four‑day winning streak to kick off December, with the S&P 500 up more than 16% for the year and the Nasdaq ahead by a bit over 20%. [1]
Globally, stocks are hovering near records as well. World equity markets hit an all‑time high back in September, and more recently the MSCI All Country World Index notched its strongest weekly gain since May, helped by renewed optimism that the U.S. Federal Reserve will cut interest rates again in December. [2]
So yes: the “bull stock market” is still charging. But it’s not a simple feel‑good story. Under the surface you have stretched valuations, a narrow group of AI‑heavy mega‑caps doing the heavy lifting, and a wall of 2026 forecasts that range from “still running” to “very nice bull you’ve got there, shame if something happened to it.”
Where the 2025 bull market stands today
This bull phase officially dates back to October 12, 2022, when the S&P 500 bottomed near 3,577. In the three years since, the index has climbed about 83%, according to analysis marking the bull market’s third “birthday” in October. [3]
RBC Wealth Management calculates that from the October 2022 low through early December 2025:
- The 10 largest S&P 500 stocks have surged about 175% on a total‑return basis.
- The S&P 500 overall is up roughly 100%.
- The equal‑weight S&P 500 (every stock gets the same weight) is “only” up about 58%. [4]
In other words, the bull market is real, but concentrated. A small group of mega‑cap names — think NVIDIA, Apple, Microsoft, Alphabet, Amazon, Broadcom, Meta, Tesla, Berkshire Hathaway and JPMorgan — has dramatically outpaced the rest of the index, powered by explosive earnings growth tied to artificial intelligence, cloud infrastructure and digital platforms. [5]
Recent daily action supports the “still‑bullish, slightly breathless” narrative:
- On December 5, the S&P 500 and Nasdaq logged their fourth straight gain, finishing just shy of record highs as traders looked ahead to next week’s Fed meeting. [6]
- A daily market recap from Edward Jones notes that major U.S. equity indexes are “hovering near all‑time highs”, with modest weekly gains to start December. [7]
- For 2025 as a whole, multiple analyses peg year‑to‑date gains at roughly 16% for the S&P 500 and around 20–20.5% for the Nasdaq Composite. [8]
This is not just a U.S. story. UBS points out that both the S&P 500 and MSCI ACWI just chalked up their biggest weekly advances since May, extending a seven‑month winning streak for U.S. stocks. [9] And a September Reuters wrap‑up noted that global equities hit a record high as Wall Street’s bull run lifted markets worldwide. [10]
Why stocks are still in bull mode: Fed, earnings, and the AI engine
Three big forces are powering the 2025 bull stock market: rate‑cut expectations, earnings growth, and the AI investment cycle.
1. Rate‑cut hopes are doing a lot of heavy lifting
Markets are effectively betting that the Fed is going to stay friendly.
- UBS’s daily update from November 26 said futures markets were pricing about an 84% probability of a 25‑basis‑point Fed rate cut in December, up sharply from 50% just a week prior. [11]
- A follow‑up note on December 1 argued that global equities rallied as the implied probability of a December cut climbed above 87%, while the S&P 500 logged its seventh consecutive month of gains. [12]
- Reuters reported that Wall Street ended December 5 with slight gains, as U.S. data largely reinforced expectations that the Fed will cut next week rather than re‑hike. [13]
In plain language: investors are betting on a scenario where the Fed cuts rates while the economy avoids a deep recession — historically one of the sweetest spots for equities. [14]
2. Earnings are still growing into the valuations
UBS forecasts S&P 500 earnings growth of about 11% in 2025 and 10% in 2026, and maintains a price target of 7,300 on the index by June 2026, up from around 6,870 today. [15]
RBC’s 2026 U.S. outlook highlights a similar theme:
- U.S. GDP is projected to grow around 2.2% in 2026, slightly above consensus.
- Consensus earnings forecasts imply roughly 11.6% profit growth in 2025 and 12.8% in 2026 for the S&P 500. [16]
RBC is not blind to valuation risk — they note that the S&P 500’s forward price/earnings ratio of about 21.3x is well above its 10‑year average near 18.6x — but they argue that high multiples probably only become a real problem if either economic or earnings growth “buckles.” [17]
Morningstar’s December 2025 outlook is more forgiving. On their numbers, the U.S. equity market trades at roughly a 3% discount to their composite estimate of fair value, and value and small‑cap stocks actually outperformed in November, hinting at better breadth beneath the surface. [18]
3. The AI supercycle is still the poster child of the bull market
AI remains the loudest engine under this bull market’s hood. RBC’s analysis of the rally highlights how the 10 largest S&P 500 stocks — dominated by AI‑exposed giants — have trounced the rest of the market since the bull began. [19]
RBC also frames the current moment as a shift from “AI 1.0” — a capital‑spending boom to build data centers, chips, and cloud infrastructure — to “AI 2.0”, where productivity and profit gains start showing up in companies both inside and outside the tech sector. [20]
Recent stock‑picking lists reflect that theme:
- Investor’s Business Daily highlights Taiwan Semiconductor, Vertiv Holdings, Constellation Energy, Genmab and JPMorgan as stocks near technical “buy points” tied to AI infrastructure, energy demand, biotech innovation and financials. [21]
- MarketBeat screens continue to feature large‑cap tech leaders like NVIDIA, Tesla, Meta Platforms and Apple among the most actively traded big‑cap names. [22]
Underlying message: the bull market’s leadership is still very much AI‑centric, but the winners are starting to widen out into energy, infrastructure, biotech and financials tied to that theme.
What Wall Street expects: 2026 S&P 500 targets for a maturing bull
This is the season when investment banks roll out their 2026 stock market outlooks, and they’re broadly bullish — albeit with plenty of caveats.
Big‑name S&P 500 targets
Business Insider’s roundup of major strategist calls shows a cluster of bullish 2026 S&P 500 targets: [23]
- UBS: S&P 500 at 7,300 by June 2026, driven by double‑digit earnings growth and multiple Fed cuts into early 2026. [24]
- JPMorgan: 7,500 by end‑2026 (about 10% upside), leaning on an “AI supercycle” delivering 13–15% profit growth, plus a resilient U.S. economy to justify current valuations. [25]
- Morgan Stanley: 7,800 by end‑2026 (around 14% upside), arguing that the U.S. has emerged from a “rolling recession” and is in the early stages of a rolling recovery, with mid‑to‑high‑teens earnings growth supported by AI productivity gains and an accommodative Fed. [26]
- Deutsche Bank & HSBC (via recent forecast round‑ups) see the S&P 500 reaching between 7,500 and 8,000 in 2026, effectively calling for a renewed bull market phase powered by strong earnings and ongoing rate cuts. [27]
RBC’s 2026 U.S. outlook is slightly more cautious in tone but still constructive. They argue there are “enough potential catalysts” for investors to give U.S. equities the benefit of the doubt in 2026, provided three things happen at once:
- Economic and profit growth remain healthy.
- The AI cycle evolves from narrow infrastructure spending to broader productivity gains.
- The market defies its historical pattern of ~22% corrections around U.S. midterm election years. [28]
They start 2026 with a market‑weight allocation to U.S. stocks, favoring dividend‑growth names and the health‑care sector for their combination of defensiveness and earnings potential. [29]
The “most hated” bull market problem
Despite strong price gains, several strategists still describe this as a “distrusted” or “hated” bull market: investors remember the 2022 bear, see constant headlines about stretched valuations, and worry the AI boom might be a bubble in disguise.
- One December market commentary notes that while the S&P 500 is up more than 16% in 2025 and the Nasdaq over 20%, valuation metrics are flashing “extreme”, and economic uncertainty remains elevated. [30]
- RBC flags that forward P/E of ~21x vs a 10‑year average of 18.6x is a yellow light, especially if AI spending runs into real‑world constraints like power capacity and regulation. [31]
So the consensus view is: bullish, but not blind.
Where the bull is strongest: AI leaders, small caps and emerging markets
Mega‑cap AI and tech
We’ve already seen how the top 10 S&P 500 stocks have dramatically outpaced the rest of the index. RBC attributes this to far faster earnings and cash‑flow growth among large, AI‑exposed technology names compared with the broader market. [32]
From a portfolio‑construction perspective, that creates a paradox:
- On one hand, those names have been the engines of the bull market.
- On the other, they’ve made the index top‑heavy, concentrating risk for passive investors who own market‑cap‑weighted funds. [33]
Several institutions, including RBC and UBS, are gently encouraging investors to check their single‑stock and sector weights and rebalance when positions drift too far above target. [34]
Small‑cap revival on rate‑cut hopes
If 2023–24 was the story of mega‑caps, late 2025 is seeing glimmers of a small‑cap comeback:
- A weekly review from American Custody notes that in one recent week the Russell 2000 rallied 5.55%, outpacing the S&P 500’s 3.74% gain as investors bet that lower rates will disproportionately benefit smaller, more domestically focused companies. [35]
- Veteran strategist Sam Stovall highlighted in a December forecast that December is historically strong for stocks, with small‑caps often outperforming thanks to the so‑called “January Effect.” [36]
Morningstar also points out that value and small‑cap stocks outperformed in November, and that the overall U.S. market is slightly below fair value on their models — suggesting some segments of the market are less stretched than the headline indexes imply. [37]
Emerging markets and the weakening dollar
The bull market isn’t purely a U.S. phenomenon. Cambridge Associates argues that emerging‑market equities are set to outperform U.S. stocks as the U.S. dollar’s decade‑long bull run gives way to a likely multi‑year bear phase. [38]
Key points from their analysis:
- The dollar fell as much as 10% this year from its highs but remains about 29% above its median real valuation, leaving room for further weakness.
- Global ex‑U.S. stocks outperformed U.S. equities by 6.6 percentage points in local currency and 13.9 points in dollar terms in 2025.
- Latin America stands out with around 37% year‑to‑date equity returns, helped by deeply discounted valuations and improving macro conditions. [39]
Put together, that suggests the bull stock market is increasingly multi‑polar, with leadership rotating gradually toward non‑U.S. and small‑cap names, even as mega‑cap U.S. tech continues to dominate headlines.
The bear case: what could derail the bull stock market in 2026?
Of course, no bull market article is complete without a quick tour of the doomsday corner. A widely discussed piece this weekend points out that this rally is the second‑priciest bull market on record when measured by the Shiller cyclically adjusted P/E ratio (CAPE), and lays out three potential crash catalysts for 2026. [40]
Across research houses, a few common risk themes emerge:
- Valuation risk and earnings disappointment
- High forward P/Es, especially in AI‑heavy tech, leave limited room for error. RBC notes forward P/E of 21.3x vs a 10‑year average of 18.6x, and worries about “circular” AI financing (startups funded by big AI firms then spend heavily on those same firms’ hardware and cloud services). [41]
- If earnings growth undershoots those rosy 11–13% forecasts, multiples could compress quickly. [42]
- Policy and rate‑path surprises
- Many bullish scenarios assume two or more Fed cuts into early 2026, then a pause. UBS expects fed funds around 3.75% by mid‑2026, while RBC sees limited room for rates to fall much beyond the mid‑3s given still‑elevated core inflation. [43]
- If growth accelerates more than expected, markets may pivot from “how many cuts?” to “are hikes back on the table?” later in 2026, which could hit both bond and equity valuations. [44]
- AI hype vs. real‑world constraints
- RBC flags several “yellow warning signs” around AI: circular financing, infrastructure bottlenecks (especially power generation), and the possibility that AI capex growth simply cannot continue at its recent pace. [45]
- If AI earnings fail to match the trillion‑dollar expectations embedded in current prices, the leadership cohort of the bull market could see a sharp de‑rating.
- Macro and political shocks
- RBC reminds investors that historically the S&P 500 has suffered an average 22% correction around U.S. midterm election years — a pattern 2026 may or may not repeat. [46]
- Other strategists point to trade tensions, fiscal stress and geopolitical risks as potential triggers for a shakeout in early 2026, even while maintaining longer‑term bullish targets above 7,500 for the S&P 500. [47]
So the bear case isn’t “winter is coming tomorrow”; it’s more “this is a fit, fast bull running on a narrow mountain path.” The upside is still there, but so is the drop.
Investor takeaways: navigating a late‑stage bull stock market
For individual investors, the question isn’t “Is this a bull market?” — it clearly is — but how to behave inside it. A few themes recur across institutional research, all of which are more about discipline than heroics:
- Rebalance after big winners
- Multi‑year outperformance by mega‑cap AI and tech stocks has left many portfolios overweight a handful of names. Both RBC and UBS stress the importance of trimming positions that have drifted far above normal weightings and revisiting concentration risk at the single‑stock and sector level. [48]
- Broaden beyond the “Magnificent Few”
- With small‑caps, value stocks and non‑U.S. markets showing fresh signs of life — and in some cases trading at discounts — analysts argue that broadening exposure could improve resilience if leadership rotates away from mega‑cap tech. [49]
- Stay focused on earnings, not just prices
- Nearly all bullish 2026 forecasts rest on the same pillar: strong, broad‑based earnings growth. That means paying attention to profit trends, margins and cash flows rather than treating index levels as a scoreboard detached from fundamentals. [50]
- Prepare emotionally for more volatility
- Several outlooks explicitly call for a continued bull market with higher volatility — a polite way of saying that sharp pullbacks are likely along the way. [51]
- Match risk to your own time horizon
- Research houses can afford to talk in sweeping terms about 2026 and beyond. Individual investors still need to match equity exposure to their own risk tolerance, cash needs and time horizon, ideally with the help of a qualified adviser.
Bottom line: a powerful bull, but no free lunch
As of December 7, 2025, the bull stock market is:
- Powerful – U.S. and global indexes sit near record highs; the current bull has delivered an 80%‑plus gain from the 2022 low. [52]
- Narrow – AI‑heavy mega‑caps dominate returns, even as small caps, value and emerging markets begin to stir. [53]
- Loved by strategists, mistrusted by many investors – Top Wall Street firms are publishing S&P 500 targets between 7,300 and 8,000 for 2026, but they wrap those numbers in pages of warnings about valuations, AI hype and policy risk. [54]
The signal cutting through all the noise is surprisingly simple: most serious analysts still think the bull market has room to run, but only if earnings, the economy and policy all cooperate. That’s less a guarantee and more a conditional statement — which is exactly why disciplined diversification, rebalancing and risk management matter so much at this stage of the cycle.
References
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