The bull market is turning 3 years old. Here's where stocks are likely headed next.

By Joseph Adinolfi and Isabel Wang

What began as a tech-driven rally has started to broaden out. According to some on Wall Street, that should help power indexes like the S&P 500 even higher.

The bull market turns 3 on Sunday.

On Sunday, the bull market that began in October 2022 will officially blow out the candles on its third birthday cake.

So far, the gains have shown no sign of slowing down. Since the rally began, U.S. stocks have powered higher with few interruptions. In April, an abrupt tariff-inspired selloff nearly brought the bull run to an end - with the S&P 500 SPX falling by roughly 19% from a record closing high on Feb. 19, bringing the large-cap index to the edge of a bear market.

But the market bounced back with unprecedented speed. By the end of June, the S&P 500 had recorded its fastest-ever trip back into record territory following a drop of 15% or more, according to Dow Jones Market Data.

Instead of ending, the bull run has expanded. What began as a narrow, tech-driven rally has steadily broadened in 2025, pulling in sectors and stocks that had previously lagged behind or missed out entirely.

Small caps, cyclical stocks and even some defensive names are catching a bid, suggesting that the bull run may have deeper roots than previously believed.

In September, the small-cap Russell 2000 index RUT tallied its first record closing high in nearly four years, and has since continued to climb. Healthcare stocks XX:SP500.35 - which have seen their weighting in the S&P 500 shrink dramatically since the bull market began - have also found some renewed momentum over the past couple of months.

"I like to say that rotation is the lifeblood of a bull market, and that's exactly what we're seeing here," said Ryan Detrick, chief market strategist at Carson Group, during an interview with MarketWatch.

In 2023, only three sectors - information technology XX:SP500.45, communication services XX:SP500.50 and consumer discretionary XX:SP500.25 (the latter housing the likes of Tesla Inc. (TSLA) and Amazon.com Inc. (AMZN)) - managed to outperform the broader index.

But over the past two years, this makeup has started to shift (see table below). Since the start of 2025, not only are all 11 of the S&P 500's sectors trading in the green, but four of them are doing better than large-cap index as a whole. As the formerly high-flying consumer-discretionary sector has struggled this year, industrials XX:SP500.20 and utilities XX:SP500.55 have started to pick up the slack, according to FactSet data.

            Sectors          2023 change (%)  2024 change         2025 YTD change 
   Information technology               56.39    35.687637                        22.8948 
   Communication services               54.36     38.88638                       22.32225 
   Consumer discretionary               41.04    29.129326                      3.4293056 
   Industrials                          16.04    15.644276                      17.005957 
   Materials                            10.23   -1.8252015                      7.3630214 
   Financials                            9.94    28.432667                      11.020481 
   Real estate                           8.27     1.725471                      1.5492916 
   Healthcare                            0.30   0.90447664                      4.6942472 
   Consumer staples                     -2.16    11.979771                      1.2360215 
   Energy                               -4.80    2.3120522                       4.169488 
   Utilities                           -10.20     19.57959                      18.727732 
   Source: Dow Jones Market Data 

Even gold is joining in the fun: Gold prices (GC00), which have become the latest obsession on Wall Street, are on a seemingly relentless record-setting rally.

Gold for December delivery (GCZ25) was trading near its session high of $4,077 on Wednesday afternoon, amid rising skepticism about the Federal Reserve's resolve to push inflation down to the central bank's 2% target.

Some have said strength in gold and bitcoin (BTCUSD) are part of a broader "debasement trade" rooted in fears about excessive government debt and a diminished role for the U.S. dollar DXY.

By the numbers

To try and get a sense of where the market might be heading next, some investors are looking in the rearview mirror.

According to Dow Jones Market Data, 14 bull markets have come and gone since 1950, including the current one.

They have lasted 4.6 years on average, with the S&P 500 returning 160%, excluding dividends. But the length has varied widely: The longest bull run lasted more than 12 years, starting in 1987 and culminating with the peak of the dot-com bubble in March 2000. During that entire stretch, the S&P 500 didn't see a single drawdown of 20% or more.

Carson Group's Detrick has emphasized in his research that every recent bull run that has made it to its third birthday has continued at least until year five.

"This is still a relatively young bull market," the Carson Group strategist said.

In terms of returns at this point in its lifespan, the current bull market is already out ahead. Through Oct. 8, the S&P 500 has risen by 88.5% since Oct. 12, 2022, the day the S&P 500 registered its most recent bear-market low. Of the six bull markets over the past 50 years that have lasted two years or more, only one has seen notably stronger returns by roughly the three-year mark. That was the bull run that began in March 2009.

This isn't to say investors don't have reason to be worried. Those concerned with maximizing the value of their investment dollars might be turned off by the fact that, based on a number of popular valuation metrics, stocks are looking expensive these days.

Chris Zand, vice president and managing director of the private client business at Osterweis Capital Management, said he has been fielding questions from clients who have been surprised by the speed and strength of the rally.

"A lot of questions I get right now are, 'How is this possible?', 'How can we still be going up?' and 'Aren't you nervous?'" Zand told MarketWatch during an interview.

He advises clients to keep their cool and stay invested. Past stock-market performance has clearly shown that investors who buy stocks at record highs have achieved strong returns over the long run. Even those who bought shares of an index fund linked to the S&P 500 at the peak of the dot-com bubble would still be sitting on a gain of more than 350% in October 2025, FactSet data showed. If dividends are included, that return would be even higher.

Signs of froth

Chris Grisanti, chief market strategist at MAI Capital Management, has been working on Wall Street since 1987. He started his career as a corporate finance lawyer one week after the Black Monday crash, he told MarketWatch.

Since then, he has seen many bull runs come and go. In terms of intensity, the only example that rivals today is the dot-com bubble, he noted. Certain parallels between then and now have helped inspire what Grisanti described as "schizophrenic" thinking among professional money managers. Many are paying close attention to the positives that could keep the rally going, as well as the risks that could stop it in its tracks.

Artificial-intelligence optimism is riding high, and many on Wall Street remain convinced of the technology's potential to boost profit margins by making workers more productive.

At the same time, worries about rich valuations persist, and some fear that the momentum driving this market might be nearing a short-term peak. A shakeout that some believe is overdue could soon follow.

"On the one hand, you've got really solid reasons why the market could keep going. AI is going to be unbelievable for profit margins and productivity. And now you've got the Fed lowering rates," he told MarketWatch in an interview. "Then you've got the momentum, and the fact that tariffs weren't as bad as we had thought."

More upside ahead?

Now the question is whether the AI hype, coupled with a boom in investment spending by some of the world's largest companies, can keep driving the market higher.

S&P 500 companies are projected to see 8% year-over-year earnings growth in the third quarter - marking their ninth consecutive quarter of earnings growth, albeit down from 11.9% in the second quarter, according to FactSet data.

Josh Emanuel, chief investment officer at Wilshire Advisers, said Wall Street now expects capital expenditures by a group of Big Tech firms - most of which are directed toward new data centers and the chips needed to operate them - will peak in the third quarter. If that's correct, it means the guidance and market expectations on capex in the final quarter of 2025 and into 2026 could see a large decline.

Some, including MAI's Grisanti, have warned that any signs of a slowdown in AI-related capital expenditures could hurt the broader market. But according to Emanuel, falling expectations would merely set a lower bar for these companies to surpass - and that could help keep the AI theme going heading into next year.

According to Emanuel, AI and robotics are two major investing themes that are still in their early stages, and plenty of potential remains that could power more gains for the market ahead.

Still, Emanuel acknowledged that the U.S. stocks are "technically pretty overbought" in the short term. That could lead to an "air pocket," with the market seeing a modest pullback in the not-too-distant future, he said.

But investors shouldn't see a pullback as a reason to bail out of stocks entirely, he added. Instead, it would merely present another opportunity to buy the dip.

Investors will soon shift their focus to third-quarter corporate earnings when major banks such as JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Goldman Sachs Group Inc. (GS) start reporting their quarterly results on Oct. 14.

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10-09-25 0918ET