The Bull Market Is Turning 4 Years Old, But Yields Could Crash the Party

Four years ago, the S&P 500 hit 3,577. It was October 12, 2022. Inflation was running hot, the Fed was still in hiking mode, and nobody wanted to touch stocks with a ten-foot pole.

Fast forward to today. The index sits around 7,811. That's a gain of 118.4% in four years. The bull market has doubled your money, and it did it while shrugging off an AI bubble scare, a Fed hiking cycle, and a bond selloff that just pushed the 10-year Treasury yield to 5.32%, its highest level since 2002.

So the party's still going. But here's where it gets interesting.

The AI engine that keeps chugging

Let's be honest about what's been driving this thing. It's not broad-based economic euphoria. It's artificial intelligence, and the billions of dollars companies are spending to build it.

S&P 500 earnings are expected to rise more than 35% this year, fueled by capital spending from hyperscalers building data centers. Oxford Economics estimates about a third of recent US economic growth stems directly from AI investment. Nvidia's market cap alone has become a bellwether for the entire market's mood.

Anthony Saglimbene, chief market strategist at Ameriprise, put it plainly: "The AI theme is the defining feature of this bull market".

He's right. Of the 11 S&P 500 sectors, only technology and communication services have outperformed the index itself during this run. That's a narrow rally. Historically narrow.

But narrow rallies can still run. Just ask anyone who's been holding since 2022.

Now for the uncomfortable part

Here's the thing about a 118% gain: it changes the math.

When the bull market started, stocks were cheap relative to bonds. The earnings yield on the S&P 500, basically the inverse of the P/E ratio, was well above the 10-year Treasury yield. You were getting paid to take equity risk.

Today, with the 10-year sitting above 5.3%, that cushion has gotten awfully thin.

Ray Dalio, the Bridgewater founder who's seen a cycle or three, warned about exactly this last week. "We're in the part of the cycle where interest rates can rise without sending the equity market down because there's enough earnings growth and there's enough expected return," he told CNBC. "But when that cushion comes down, then you're coming later into that cycle".

Translation: stocks can handle higher yields, as long as earnings keep growing fast enough to justify the risk. The moment that growth slows, the whole equation flips.

Dalio also pointed at something most investors aren't watching closely enough: free cash flow. Earnings can look great on paper while cash generation deteriorates. "While earnings should continue to be improving, I would expect the free cash flows, I think, will be deteriorating," he said.

That matters. Because if companies are spending enormous sums on AI infrastructure and not getting cash back out, you've got a liquidity problem brewing beneath the surface.

But wait, isn't this just the same old bearish noise?

Fair question. People have been calling the top of this bull market for years. AI bubble this, valuation that. And yet here we are, celebrating the 27th record high of 2026 alone.

Ryan Detrick, chief market strategist at Carson Group, has been reminding people of something important: bull markets don't die of old age. "Four years is not, by any stretch of the imagination, scary with regards to a bull market," said Mark Hackett of Nationwide. "They don't end of old age; they end from disease".

Historically, Detrick notes, every bull market that made it to four years also made it to five. And the average length of those runs was eight years.

So no, four candles on the cake doesn't mean the party's over.

The thing that could actually end it

If you're looking for the disease, it's probably not going to be a bad earnings quarter. It's going to be the bond market.

Here's the dynamic: the US government is running massive deficits. Companies are borrowing hand over fist to fund AI buildouts. Foreign central banks are pulling back from dollar-denominated debt. All of that supply hitting the market at once pushes yields higher.

And higher yields give investors a genuine alternative to stocks. Why own a volatile equity when you can lock in 5.3% on a Treasury, arguably the safest asset on earth?

Morningstar's analysis makes the point well: rising yields are a headwind, but they've been offset by a resilient economy and booming profits. The question is how long that offset lasts. If earnings growth slows and yields stay elevated, the math gets ugly fast.

Dalio thinks the bond selloff has further to run. "We are in a bond bear market," he said. "There's more to go".

What this actually means for you

I'm not going to tell you to sell everything and hide in cash. That's not useful advice, and it ignores the fact that this bull market has proven remarkably resilient.

But the risk profile has changed.

When stocks were cheap and yields were low, the upside was obvious. Now, with the S&P 500 trading at record highs and the 10-year above 5%, you're being asked to take on more risk for less relative reward. That doesn't mean you'll lose money. It means the margin for error is thinner.

The midterm elections next month could add volatility. Any whiff of weakness in AI spending could get punished severely. And if free cash flow starts deteriorating while earnings still look fine on the surface, the market might take a while to notice, but when it does, the reaction won't be gentle.

Four years in, the bull market is middle-aged. It's got momentum, it's got earnings growth, and it's got an AI story that still has legs. But it's also got a bond market that's no longer playing nice.

The party's not over. It just got a lot more expensive to attend.