US stock market bull market reaches 4th anniversary... 6th longest of all time

(Seoul = Yonhap News) Reporter Joo-ho Jeong = The bull market in the U.S. stock market, led by the artificial intelligence (AI) craze, celebrated its 4th anniversary on the 12th (local time).

As U.S. Treasury yields soar to the highest level in more than 20 years, views on Wall Street are divided over whether the rally will continue for a fifth year.

The S&P 500 index closed at 7,807.20 on this day. It has risen 118.3% since October 12, 2022, when the bear market closing price low (3,577.03) was reached.

During the same period, the NASDAQ composite index centered on technology stocks also rose 161.5% from 10,417.10 to 27,245.90.

According to CNBC, Market Watch, etc., the rally was led by AI-related stocks.

About 40% of the S&P 500 index is technology stocks, and after the launch of OpenAI's ChatGPT at the end of 2022, the so-called 'pick and shovel' stocks needed to build AI infrastructure have soared.

NVIDIA stands out by far. The market capitalization has increased from $280 billion (approximately 383 trillion won) four years ago to currently $5.464 trillion (approximately 7422 trillion won). It has grown approximately 19.5 times in 4 years.

Micron Technology also surpassed $1 trillion in market capitalization for the first time last May and is currently recording $1.119 trillion (approximately 1,520 trillion won).

During the four years of this bull market, seven semiconductor companies, including these two companies, Broadcom, TSMC, Samsung Electronics, SK Hynix, and AMD, reached the $1 trillion mark in market capitalization for the first time. Meta, Tesla, and Amazon succeeded in returning to the $1 trillion club.

As the bull market enters its fifth year, interest rates are emerging as a burden, with the interest rate on 10-year U.S. Treasury bonds reaching 5.237% and 30-year Treasury bonds reaching 5.602%.

Jordan Rizzuto, Chief Investment Officer (CIO) of Gamma Road Capital, pointed out that rising interest rates put pressure on stock valuations and increase borrowing costs for companies.

Rising interest rates are particularly unfavorable to the AI ​​rally, which relies on high growth expectations, as it reduces the present value of future profits.

He said, “If bonds provide similar returns but have much lower volatility, pension funds and others have greater incentive to move funds from stocks to bonds.”

The fact that the rising stocks have been narrowed to a small number of large stocks also raises concerns.

Last September, 75% of S&P 500 stocks fell, and Deutsche Bank strategist Parag Thatate assessed that the concentration on technology stocks was excessive and the risk-reward ratio was no longer advantageous.

Oppenheimer's Ari Wald analyzed that the current bull market is the 6th longest among the 24 bull markets since 1932, and that looking at past cases, the median time remaining until the peak is 13 months.

There is also a lot of optimism. According to Carson Investment Research, bull markets that lasted more than four years since 1950 rose by an average of nearly 19% in the fifth year.

“Only once in more than 50 years has a bull market ended in its fifth year,” said Ryan Dietrick, chief strategist at Carson. “This bull market is the third-best start of all time at four years.”