Stock Market Strength: Is the Bull Market Still Intact?

War headlines, higher oil prices, and rising bond yields would usually put investors on edge. Yet stocks have continued to hold their ground, with energy and technology recently helping lift the S&P 500 by 1.2% for the week.

For PMR Followers, the central question is whether this strength is a brief calm before a downturn or evidence that the bull market still has room to run. Economic growth, broader market participation, earnings trends, and sector rotation offer a more useful answer than any single headline.

What Is Driving Current Stock Market Strength?

Stocks have absorbed a difficult mix of geopolitical uncertainty and higher energy costs because investors still see an economy that is expanding. Buyers haven't disappeared when bad news hits. That matters because sustained bull markets need investors willing to look beyond short-term shocks.

Recent conflict involving Iran and shipping through the Strait of Hormuz pushed oil prices and interest rates higher. However, the market appears to expect a limited confrontation rather than an extended disruption that would seriously constrain global energy supplies.

That expectation could change quickly. Still, the current response shows that investors view the shock as manageable. Strong markets do not ignore risk. They price risk against the strength of corporate profits, consumer demand, and credit conditions.

Economic Growth Still Supports the Bull Market

The latest business surveys from ISM and S&P Global indicated that both manufacturing and services continued to expand in June. That gives companies a base for higher sales, especially in industries tied to business spending and consumer activity.

Jobless claims also remain near historically low levels. A labor market that avoids a sharp rise in layoffs usually supports household spending, which remains a major driver of the US economy.

Retail activity has stayed firm as well, although World Cup-related spending may have temporarily lifted some weekly sales figures. Existing home sales tell a less encouraging story. They have hovered near a 4.1 million annualized pace for more than three years, showing that high borrowing costs still weigh on housing.

Economic data rarely move in one direction. The broader picture, however, remains consistent with expansion rather than recession.

Oil Prices and Interest Rates Have Not Broken Investor Confidence

Oil prices matter because they touch nearly every corner of the economy. Higher gasoline, diesel, and transportation costs can reduce household purchasing power. They can also raise costs for manufacturers, airlines, retailers, and other businesses.

Bond yields rose alongside oil prices after the Middle East tensions increased. Higher yields can pressure stock valuations because future profits become less valuable when discounted at higher rates. They also raise borrowing costs for companies and consumers.

For now, investors appear to believe the increase in oil and rates will not last long enough to derail growth. That view will face a tougher test if shipping disruptions widen or energy prices remain elevated for months.

A temporary oil shock can be absorbed. A lasting surge can weaken spending, squeeze margins, and change the market's outlook.

The Bull Market Outlook Improves as Market Breadth Widens

Market breadth measures how many stocks participate in an advance. An index can rise even when only a handful of giant companies are doing the lifting. That kind of rally can continue for a while, but it leaves the market more exposed if its leaders stumble.

Broader participation creates a sturdier foundation. It means investors are finding opportunity in more industries, company sizes, and investment styles. Breadth does not promise future gains, but it offers a useful check on whether an advance has real support.

The improvement since the April market low tied to war fears has been meaningful. More companies are recovering, and leadership is no longer limited to the largest technology names.

More Stocks Are Joining the Market Advance

About 67% of S&P 500 companies, or 336 stocks, recently traded above their long-term moving averages. That is a healthier picture than an index driven by a narrow group of mega-cap stocks.

Long-term moving averages do not predict where shares will trade next week. However, they help investors see whether upward momentum has spread across the market. When two-thirds of the index trades above that trend line, participation has clearly improved.

This matters after several years when the largest technology companies dominated index returns. A broader market can better absorb a pullback in one sector because other groups may help offset the damage.

PMR Followers should watch whether that figure continues to rise or begins to fall. A single reading matters less than the direction over several weeks and months.

Small-Cap Value Stocks Are Leading the Rotation

Leadership has shifted away from the market's previous winners. Money has moved out of some semiconductor, memory, and hardware names after a strong run, while value-oriented, cyclical, and smaller companies have attracted more interest.

Small-cap value stocks had gained more than 22% in the cited period, placing them ahead of other major style groups. That move is important because smaller companies had lagged the mega-cap leaders during much of the bull market that began in October 2022.

The rotation fits a middle-stage economic expansion. Investors often look beyond high-growth leaders when activity remains solid and profit growth starts to broaden across the economy.

Still, small companies deserve close attention for another reason. They usually rely more heavily on bank lending and domestic demand. If credit tightens or growth slows, they often weaken before the largest companies do.

Earnings Could Decide Whether the Rally Continues

Stock prices can rise on enthusiasm for a time. A durable advance eventually needs profit growth to support it. Earnings reports will show whether companies can justify higher valuations while coping with wages, interest costs, energy prices, and changing demand.

The early data has been encouraging. Yet investors should focus less on one strong report and more on the overall direction of estimates, revenue growth, and company guidance.

Analysts Are Raising Profit Estimates

According to FactSet, the consensus forecast calls for roughly 23% annual earnings growth. If achieved, that would produce a second straight year of earnings growth above 20%.

Analysts have raised estimates for the recently ended quarter at the fastest pace since the fourth quarter of 2021. This is a stronger backdrop than a market where earnings forecasts keep falling while stock prices rise.

Companies have also beaten consensus estimates by more than 7% on average for nearly four years. Among the first 18 S&P 500 companies to report in the current season, results exceeded expectations by an average of 14.5%.

Those figures are encouraging, not guarantees. Expectations can change quickly when management teams update their outlooks. Strong guidance matters as much as a backward-looking earnings beat.

Technology Still Leads, but Other Sectors Need to Catch Up

Technology remains the largest source of earnings growth, particularly because of heavy spending on artificial intelligence infrastructure. Semiconductors, data centers, networking equipment, and related services have benefited from that spending cycle.

At the same time, many hyperscalers funding AI infrastructure have traded sideways for close to a year. Their stock prices have held flat while earnings expectations rose, which has pushed their forward price-to-earnings ratios toward multi-year lows.

That reset reduces some valuation pressure in the largest technology companies. Even so, a healthier rally needs more than tech profits. Investors should look for improving earnings growth in industrials, financials, consumer companies, and other sectors that lagged the early phase of the bull market.

Broader profit growth would match the recent improvement in market breadth. Weak results outside technology would raise doubts about how durable the rotation can be.

How Patriot Market Research Followers Can Track the Next Turn

Patriot Market Research followers don't need to predict every market swing. A better approach is to watch whether the underlying evidence is improving or weakening.

Bear markets often begin at the market's edges. Smaller, more domestically focused companies tend to struggle first when borrowing becomes harder or economic growth slows. Trouble can then spread to larger leaders.

Signs That Would Support a Longer Bull Market

Several measures can help confirm that the advance remains broad and economically supported:

• Jobless claims stay contained, while manufacturing and services remain in expansion.

• Retail activity holds up without a sharp drop in consumer demand.

• Analysts keep raising earnings estimates, and companies deliver solid forward guidance.

• More S&P 500 stocks remain above their long-term moving averages.

• Value and small-cap stocks continue to participate instead of falling behind mega-cap technology.

Strength across several groups carries more weight than a brief rally in one popular industry. A market with wider participation has more sources of support when a leading sector pauses.

Warning Signs That Could Change the Outlook

The risk list is clear. A wider Middle East conflict could keep oil prices high and disrupt shipping. Persistently higher interest rates could slow housing, investment, and credit-sensitive businesses.

Investors should also watch for tighter lending standards, weakening retail demand, falling earnings estimates, and declining participation among small-cap stocks. Those conditions would point to stress below the surface even if the major indexes remain near highs.

A sharp drop in smaller companies deserves special attention. Their performance often offers an early view of whether credit and domestic demand are starting to deteriorate.

The Bull Market Still Has Important Tests Ahead

The current evidence fits the middle innings of a bull market more than the opening stage of a major bear market. Economic activity remains positive, earnings expectations are rising, and investors are rotating into value and smaller companies rather than leaving equities altogether.

That outlook depends on conditions that can change. The next earnings season, credit trends, oil prices, interest rates, and participation from smaller companies will show whether the market's broader strength can continue.

The market has held firm through an uncomfortable mix of risks. Its next test is whether company profits and wider participation can keep supporting that confidence.