The current bull market in US stocks began in October 2022, one month before the introduction of ChatGPT, which was most Americans’ first introduction to Artificial Intelligence (AI). While early bull market gains in 2023 and 2024 were led by AI-focused large tech companies, in 2025 more businesses started using AI to improve their services. The promise of greater productivity from using AI could help extend and broaden the bull market in 2026.
2025 was the third consecutive year of double-digit returns for large cap US stocks, as measured by the S&P 500 Index. Diversified investors benefited from even stronger gains in foreign stocks last year and a bond market that provided stability and respectable mid-single digit returns. Money market funds continued to be a safe parking spot for short-term cash needs, although interest rates declined as the US Federal Reserve Bank cut the Fed Funds Rate in recent months.
Despite the uncertainty around the impact of tariffs and the threat of even higher tariffs, the US economy continued to grow in 2025 and inflation dropped to below 3%. As the new year begins, optimism abounds on Wall Street and most analysts are forecasting a continuation of the bull market. Not all the good news is due to the implementation of AI growth strategies, but continued heavy investment in data centers to propel AI computing will certainly help economic growth.
Other factors supporting a positive outlook for investments include tax policy, potential interest rate cuts, further deregulation and predictions of strong corporate earnings growth. The US consumer represents more than 50% of US economic activity and the extension of low tax rates and anticipated above-average tax refunds should keep consumers shopping. Business investment is expected to take advantage of expanded tax credits and analysts believe corporate earnings growth will exceed the low double-digit earnings growth achieved in 2025. The prospect of lower interest rates and energy prices adds to the potential for above-average economic growth.
This rosy outlook is certain to be interrupted by both known and unknown factors. Geopolitical news continues to be volatile. The war between Russia and Ukraine drags on with Russia showing no signs of giving up the fight. The 20-point peace plan for Gaza is moving forward slowly, and conflicts are sure to arise. The US is attempting to reassert its power in the Western Hemisphere, and the impact on global relations is unknown but will be disruptive.
Within the US, we have our own conflicts. 2026 is a mid-term election year. Voters are concerned about health care and security, but the direction of the economy and our confidence in the future are what motivate people to vote. Affordability is a hot-button issue and the direction of inflation will be highlighted on the campaign trail. The job market has cooled, with businesses taking a “low-hire, low- fire” approach, but unemployment remains low. We could face another federal government shutdown.
The outcome of these US and foreign battles will affect investor confidence and we should expect volatility in investment markets as events unfold. However, we believe prudent investors should remain positive about their long-term investment strategy. The current bull market is young in comparison to other bull markets since 1980. And the impact of Artificial Intelligence on worker productivity could bring above-average economic growth to support further investment market gains.
Christopher Borden is a financial advisor and Managing Partner with Canby Financial Advisors, a SEC-registered investment adviser. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or training. Chris can be reached at 508.598.1082 or cborden@canbyfinancial.com.
Disclosure: Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved. This material is intended for informational/educational purposes and is not a recommendation for or against cryptocurrency. It should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. TheS&P 500 is a stock market index that measures the performance of about 500 U.S. companies across 11 sectors. All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance is not indicative of future results.
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