The current bull market turns four years old in October. Rather than predict what happens next, this piece walks through four ideas that help explain where the market stands today and how disciplined investors tend to think about them.
I. What Actually Ends a Bull Market
A bull market is typically defined as a rise of 20% or more from a market low, and it lasts until the market falls 20% from a high. Since World War II, the average U.S. bull market has lasted roughly four to five years. The longest, from 2009 to 2020, ran about eleven.
The key lesson from history is that bull markets don't end because they get old. They tend to end for one of three reasons:
- A recession, which shrinks corporate earnings
- A policy mistake, most often interest rates raised too far, too fast
- A valuation shock, when prices have run so far ahead of earnings that expectations have to reset
The takeaway: a bull market's age tells you little on its own. The better question is whether any of these three conditions is developing.
II. How to Read a P/E Ratio
The price-to-earnings (P/E) ratio compares a stock or index's price to its earnings. The forward P/E uses expected earnings over the next twelve months. It's the most common way to gauge whether the market is expensive relative to its profits.
There are two ways the market can rise:
- Earnings grow, and prices follow
- The multiple expands: investors simply pay more for the same earnings
The first is generally more durable. The second depends on sentiment, which can reverse.
Today, the S&P 500 trades at roughly 19 times forward earnings, close to its 10-year average of about 19. Notably, the forward P/E has declined from about 20.4 in June, even as the index approached record highs. When prices rise while the P/E falls, it means earnings are growing faster than prices. Analysts call this de-rating, and it's one reason many strategists distinguish today's market from the late 1990s. At the 2000 peak, the S&P 500 traded near 25 times forward earnings.
The takeaway: a rising market isn't automatically an expensive one. What matters is whether earnings are keeping pace.
III. Why Markets Have Historically Favored Gridlock
It's natural to assume markets prefer one party or the other. Historically, though, markets have often responded better to divided government, when one party doesn't control both the White House and Congress.
The reasoning is simple. When sweeping legislation is harder to pass, the range of possible policy outcomes narrows. Businesses can plan with more confidence, and investors can price risk more easily. Current forecasts and prediction markets favor Democrats in the November congressional elections, which would divide power in Washington.
Historically, stocks have also tended to perform well in the twelve months following midterm elections. That pattern is often attributed less to who wins than to uncertainty clearing once results are known.
The takeaway: elections tend to create short-term noise. Reacting to them with long-term portfolio changes has rarely been rewarded.
IV. The Hidden Risk of Concentration
After a long run led by a single theme, portfolios often carry more exposure to it than investors realize. The same companies can appear in individual stock holdings, sector funds, thematic ETFs, and broad index funds, where the largest companies now make up a significant share of the index.
The takeaway: diversification isn't just owning many things. It's making sure they aren't all the same bet.
Putting It Together
A four-year-old bull market raises fair questions, but the more useful questions are about fundamentals and portfolio construction. Are earnings supporting prices? How much of the same bet does the portfolio really hold? Answering those tends to matter more than predicting the market's next move.
Sources: FactSet Earnings Insight (September 2026); S&P 500 historical data; election forecast and prediction-market data (September 2026).