can the stock market keep going up?

This article examines whether broad equity markets — mainly the U.S. stock market — can continue to rise. It reviews the 2023–2025 rally, macro drivers (policy, earnings, AI investment), valuation ...

2025-09-19 12:05:00

By Cipher Trio

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Can the stock market keep going up?

Can the stock market keep going up? This article addresses that question head-on. It reviews the multi-year equity rally through 2023–2025, the macro and structural forces that could sustain further gains, valuation and market-internal indicators, technical signals from 2025, and plausible scenarios for 2026 and beyond. Readers will find measurable items to monitor and practical, non-personalized approaches to manage risk — plus a short note on how other asset classes and crypto behaved during the rally.

Note: this article is informational only, not personalized investment advice. Historical patterns do not guarantee future results.

Background and recent context

The early-to-mid 2020s produced one of the most powerful equity rallies in recent memory. Broad indices posted multi-year double-digit returns, often led by a concentrated group of mega-cap and AI-related names. As of Dec 31, 2025, major U.S. indices finished the year at or near record highs after significant volatility earlier in the cycle. As of Dec 31, 2025, according to BBC reporting, the U.S. stock market closed 2025 on a high note following a volatile year.

Several features stood out in 2023–2025:

Multi-year gains with several consecutive years of strong returns for the S&P 500 and other major indices.
Extreme leadership concentration: a handful of mega-cap technology and AI beneficiaries (notably leading chipmakers and cloud/AI platform companies) accounted for a disproportionate share of index gains.
Sector dispersion: while tech and AI dominated, biotech, select industrials, and parts of health care saw pockets of strong performance.
2025-specific developments: record index levels, shifts in central bank leadership and communications, episodic tariff and trade headlines, and debates about breadth versus concentration.

Major outlets framed the question of persistence differently. For example:

As of Oct 27, 2025, CNN Business discussed narratives suggesting the rally may have more room to run.
Morgan Stanley released an "Investment Outlook 2026" (Nov 19, 2025) noting conditions that could guide continued U.S. equity growth.
Fidelity (Oct 8, 2025) published analysis arguing a bull market could have years to run given certain macro and earnings dynamics.
Morningstar provided quarterly outlooks in Q4 2025 (Oct 7 and Dec 3, 2025) assessing valuation and earnings momentum.
Motley Fool ran multiple pieces in 2025 (June 18; Dec 18; Dec 29, 2025) asking whether 2025 winners can keep winning into 2026.
BBC (Dec 31, 2025) summarized year-end results and volatility; Kiplinger (Dec 29, 2025) published sector and stock ideas for the new year.

These perspectives illustrate how analysts balanced bull-case drivers (earnings, AI investment, liquidity) with concerns about valuation, concentration, and policy risk.

Historical perspective on sustained bull markets

Long secular bull markets — extended uptrends lasting years or even decades — have occurred in market history. Historically, sustained uptrends often have these traits:

Secular vs cyclical bulls: secular bulls can last many years (e.g., post-1982 to 2000 growth), while cyclical bulls are shorter and embedded in a secular trend.
Periodic pullbacks: long rallies almost always include meaningful corrections or temporary bear phases that do not necessarily end the secular advance.
Rotation and breadth shifts: durable rallies often broaden over time, with leadership rotating from the early winners to other sectors as valuations and earnings growth evolve.

Lessons from past multi-year rallies:

Momentum can persist longer than many expect — it is a real factor in markets — but it is not unbounded.
Leadership concentration raises fragility: when a small group of stocks drives returns, market performance can swing quickly if those names disappoint.
History provides context but is not determinative: structural changes (technology, regulation, demographics) can alter the pace and distribution of returns.

The past therefore offers guidance (timelines, typical corrections) without guaranteeing future outcomes.

Key drivers that could allow continued upside

Below are the main fundamental, structural, and market-friction drivers that could support further gains.

Monetary policy and interest rates

Central bank policy remains one of the single most important drivers of equity markets. Key channels:

Policy rates and expectations: cuts versus hikes change discount rates used by investors. Expectations of rate cuts typically lift equity valuations as discount rates fall.
Real yields: nominal rates adjusted for inflation (real yields) directly influence the present value of future corporate cash flows. Lower real yields generally justify higher price-to-earnings multiples.
Bond market signals: yield-curve positioning, term premia, and rate volatility shape risk appetite and the attractiveness of equities versus fixed income.

As of late 2025, communications from the U.S. Federal Reserve and other central banks — and any leadership transition — were closely watched for signals about the path of rates and the timing of potential easing. If central banks pivot to a sustained easing cycle in 2026, that could materially support equity valuations.

Corporate earnings and profit margins

Sustained upside is more credible when earnings growth and margins are expanding:

Earnings growth: steady top-line and EPS growth support higher index levels without multiple expansion.
Profit margins: margins that remain resilient (thanks to pricing power, productivity gains, or cost management) underpin earnings even in moderate revenue environments.
Productivity and AI-driven gains: structural efficiency improvements from AI adoption can lift margins and return on invested capital for firms that successfully deploy the technology.

Analysts in late 2025 pointed to pockets of strong earnings (cloud, AI infrastructure beneficiaries, select healthcare launches) as a contributor to market strength.

Fiscal policy and regulation

Fiscal measures — stimulus, tax changes, infrastructure spending — can provide cyclical tailwinds for profits and growth. Deregulation in certain industries may also boost capital expenditure and margins.

The magnitude and timing of fiscal support matter. Targeted investment programs, tax incentives for R&D or capital investment, and trade policy shifts can alter revenue prospects for sectors.

Structural/technological growth (AI and related investment)

A defining feature of the 2023–2025 rally has been concentrated gains tied to AI investment. Key points:

Massive AI spending on chips, cloud compute, data centers, and software has driven strong revenue and margin expansion for market leaders.
The AI narrative favored large-cap technology firms that control critical infrastructure (GPUs, specialized accelerators, cloud platforms). That concentration explains much of the narrow market leadership.
Over time, AI investment could broaden across industries (manufacturing, health care, logistics), potentially widening market participation if productivity gains show up in earnings across sectors.

Market liquidity and investor sentiment

Liquidity conditions and investor behavior are potent short-term drivers:

Institutional and retail flows: ETF inflows, mutual fund allocations, and retail participation can push prices well above fundamentals for extended periods.
Margin/leverage and derivatives: elevated leverage can amplify moves in either direction.
Behavioral factors: fear of missing out (FOMO), momentum chasing, and consensus narratives about AI and other themes can sustain rallies until sentiment shifts.

In combination, these drivers explain how the market could keep rising — but they also set up the conditions under which a reversal could be sudden if one or more drivers reverse.

Valuation and market internals

Understanding valuations and internals helps assess whether further gains are supported by fundamentals or mostly sentiment.

Valuation metrics

Common measures include:

P/E (trailing and forward): measures price relative to earnings.
CAPE (Cyclically Adjusted Price/Earnings): smooths earnings over a business cycle.
Price-to-fair-value estimates from sell-side and independent research: varying inputs (discount rates, terminal growth) produce different fairness ranges.

Diverging assessments in 2025:

Some sell-side desks argued that elevated multiples were justified by stronger earnings growth and lower expected real yields (Morgan Stanley among those outlining constructive paths).
Independent research houses (Morningstar, some independent value shops) flagged elevated valuations in growth-heavy segments and suggested more modest upside unless earnings broadened.

Net effect: headline indices could appear expensive on simple P/E measures, but if earnings growth and margin expansion persist, elevated multiples can be supported.

Market breadth and leadership concentration

Narrow leadership increases fragility:

When a few mega-caps drive index returns, a disappointment in those names can lead to outsized index declines while many stocks lag.
Breadth expansion — more sectors and a greater share of stocks participating in the advance — signals a healthier, more sustainable market.

In 2025, breadth was mixed: headline indices hit records while many mid- and small-cap names lagged, highlighting concentration risk.

Size and style dispersion (large vs small cap; growth vs value)

Small-cap and value segments often present relative-value opportunities when large-cap growth becomes richly priced.
As of late 2025, value and small-cap pockets showed attractive valuations compared with stretched growth names, offering potential rebalancing candidates for investors seeking diversification.

Technical signals and timing considerations

Technical indicators provide near-term probability assessments, not guarantees. Commonly monitored signs include:

Trend and momentum: sustained uptrends and positive momentum supported the rally through 2025.
Moving averages: price above longer-term moving averages indicated an uptrend; crosses below could signal momentum loss.
Market breadth indicators: advance/decline lines, percent of stocks above key moving averages.
Volatility measures: VIX and realized volatility spikes often accompany corrections.

In 2025 technicals suggested strong momentum overall, but some AI-linked names showed signs of buyer exhaustion and elevated volatility, warning of episodic corrections even during the uptrend.

Major risks and constraints to further gains

Below are the main downside risks investors and analysts identified as of late 2025.

Inflation and unexpected monetary tightening

A resurgence in inflation or a surprise hawkish pivot by central banks would raise discount rates and compress multiples quickly. Bond yields rising faster than anticipated is a clear downside trigger.

Geopolitical risks and trade policy

Tariff episodes and trade tensions — including tariff-related headlines observed in 2025 — can harm supply chains, raise input costs, and lower forward revenue for multinational firms.

Earnings disappointments and AI execution risk

High expectations for AI-led revenue and productivity gains create downside when execution lags. If top AI beneficiaries fail to meet growth or margin targets, de-rating could be rapid.

Market structure and liquidity shocks

Concentration, leverage, and crowded derivatives positions can produce liquidity squeezes and rapid deleveraging. A narrow market where a few names are very large increases the chance of volatility cascading.

Labor market and macro slowdown

A slowing labor market or weakening consumer demand would hit revenue growth, especially for cyclically sensitive sectors, and could pressure consensus earnings estimates.

Plausible scenarios and probabilities

Below are three broad scenarios to frame expectations (probabilities are illustrative, not predictive).

Bull case

Conditions:

Fed and other major central banks move to a clear easing cycle in 2026, lowering real yields.
Corporate earnings grow in line or above consensus, supported by new product launches (example: successful drug or device launches) and AI-driven productivity gains.
Market breadth improves, with small-cap and non-tech sectors joining the advance.

Implication: indices rise further, led by earnings growth and modest multiple expansion. Narrow leadership becomes less of a concern as gains broaden.

Base case

Conditions:

Fed policy remains cautious; rates fall slowly or expectations oscillate.
Earnings continue positive but with uneven sector performance; AI leaders remain strong but growth moderates.
Volatility remains elevated with periodic corrections, but the overall trend is modestly upward.

Implication: continued gains, but with higher volatility and several mid-sized corrections that provide both risk and opportunistic entry points.

Bear / correction case

Triggers:

Policy error: persistent inflation forces the Fed into a surprise tightening cycle.
Macro shock: a material economic slowdown or credit event weakens earnings and liquidity.
Earnings cascade: AI beneficiary group reports sequential misses, producing a sharp de-rating.

Implication: a meaningful market correction or a bear market that erodes significant index gains built up since 2023.

Investment implications and strategies

This section outlines neutral, high-level approaches investors consider under differing outcomes. This is educational, not advice.

Diversification and risk management

Maintain diversification across sectors and asset classes to reduce single-theme concentration risk.
Keep an emergency cash buffer and consider systematic rebalancing to lock in gains from large winners.
Use position sizing discipline to avoid outsized exposure to single names or themes.

Positioning by market cap and style

Consider selective exposure to smaller-cap and value areas where valuations are more attractive and participation may increase if the rally broadens.
Apply caution to large-cap growth names with very high multiples unless there is conviction about earnings execution and runway.

Tactical hedges and allocation to alternatives

Hedging tools (put options, inverse ETFs) can offer protection but come with costs. Use tactically and sparingly.
Non-equity defensive allocations — short-duration bonds, high-quality cash instruments, and gold — can reduce portfolio drawdown risk.
Alternatives (real assets, private equity, liquid alternatives) may provide diversification benefits in some portfolios.

Reminder: DO NOT interpret this as personalized investment advice.

Indicators to monitor going forward

High-signal data and events to watch:

Fed communications and rate decisions (including changes in leadership and forward guidance).
Inflation prints (PCE and CPI) and real yield movements.
Corporate earnings trends, guidance, and sector-level margins.
Market breadth measures (advance/decline, percent of stocks above moving averages).
Capital expenditure data and AI-related spending (cloud capex, data-center buildouts, semiconductor investment).
Geopolitical events and trade-policy announcements.

Monitoring these indicators helps assess whether a rally is being underpinned by fundamentals or predominantly liquidity and sentiment.

Brief note on cryptocurrencies and other asset classes

During the 2023–2025 equity rally, other asset classes showed mixed results:

Gold: showed periods of strength in 2025 as investors sought inflation protection and diversification during volatility.
Bitcoin/cryptocurrencies: in 2025 crypto generally underperformed relative to equities and did not meaningfully explain the broad equity gains. Institutional adoption and ETF flows provided some support at times, but crypto remained a distinct, higher-risk asset class.

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Case studies and recent reportage

Below are short synopses of selected analyses and their dated perspectives to illustrate the debate.

Motley Fool — "Can These 2025 Stock Market Winners Keep Winning?" (Dec 29, 2025) and related pieces (Dec 18, 2025; Jun 18, 2025): Motley Fool explored whether top-performing names and themes (AI, selected growth and biotech) could sustain outperformance into 2026, highlighting company-level catalysts and risks.
Morgan Stanley — "Investment Outlook 2026: U.S. Stock Market to Guide Growth" (Nov 19, 2025): Morgan Stanley outlined macro and earnings pathways that could support U.S. equities into 2026, emphasizing monetary policy scenarios and sector rotation potential.
Fidelity — "Why the bullish market may have years to run" (Oct 8, 2025): Fidelity argued that structural growth drivers (including AI and productivity improvements) and favorable policy could allow a prolonged bull phase, subject to breadth improvements.
CNN Business — "Think the stock rally is over? It may just be beginning" (Oct 27, 2025): CNN reported on narratives suggesting the rally may continue, summarizing indicators and investor sentiment as of late 2025.
Morningstar — Q4 2025 Stock Market Outlook (Oct 7, 2025) and December 2025 Stock Market Outlook (Dec 3, 2025): Morningstar provided measured valuations and sector-by-sector assessments, highlighting where fair value concerns were most acute.
BBC — "US stock market ends 2025 on a high note after volatile year" (Dec 31, 2025): BBC summarized year-end positioning, record index levels, and the volatility backdrop for 2025.
Kiplinger — "Stocks That Could Take Off in the New Year" (Dec 29, 2025): Kiplinger outlined sector and stock ideas for 2026, reflecting analysts' tactical preferences.

Examples from company-level reporting and market commentary in 2025 illustrate the tension between broad market strength and concentrated leadership:

Vertex Pharmaceuticals and DexCom were cited in year-end commentary as companies with idiosyncratic opportunities and risks (source reporting in late 2025 highlighted pipeline progress and device recalls affecting respective near-term outlooks).
Nvidia and Alphabet exemplified the AI-led leadership debate. Nvidia benefited enormously from AI infrastructure demand, while Alphabet showed diversified AI execution (cloud, TPU accelerators, LLM progress) that some analysts argued could deliver strong returns without the same valuation premium.
Berkshire Hathaway commentary in 2025 revisited the resilience of long-duration compounders and operational businesses that underpin durable value creation.

These varied viewpoints illustrate why some houses were bullish on continued market gains while others cautioned about valuation concentration.

Notes on interpretation and risk

Market forecasts are inherently probabilistic; historical patterns do not guarantee future results.
This article is factual and educational. It is not investment advice or a recommendation to buy or sell securities.
For personalized guidance, consult a licensed financial professional.

Closing thoughts and next steps

Can the stock market keep going up? There is no single answer. The market could continue to climb if supportive monetary policy, durable earnings growth, and broader participation materialize. Conversely, valuation concentration, policy shifts, or macro shocks could trigger sharp corrections. As of the end of 2025, observers and major research houses presented a range of plausible outcomes for 2026.

Practical next steps for readers who want to stay informed:

Track the high-signal indicators listed above (Fed guidance, PCE/CPI prints, earnings trends, breadth measures).
Maintain diversified allocations and a cash buffer for liquidity and opportunity.
Consider custody and trading platforms aligned with security and compliance — Bitget provides exchange services and Bitget Wallet offers custody for crypto assets if you maintain small allocations to digital assets.

To explore further reading or Bitget features, visit your Bitget account or the Bitget Wallet product pages in your app.

References (report dates noted where applicable):

Motley Fool (Jun 18, 2025; Dec 18, 2025; Dec 29, 2025).
Morgan Stanley, Investment Outlook 2026 (Nov 19, 2025).
Fidelity, Why the bullish market may have years to run (Oct 8, 2025).
CNN Business, Think the stock rally is over? It may just be beginning (Oct 27, 2025).
Morningstar, Q4 2025 Stock Market Outlook (Oct 7, 2025); December 2025 Stock Market Outlook (Dec 3, 2025).
BBC, US stock market ends 2025 on a high note after volatile year (Dec 31, 2025).
Kiplinger, Stocks That Could Take Off in the New Year (Dec 29, 2025).

As of Dec 31, 2025, according to the BBC and the sources above, markets ended the calendar year at elevated levels amid persistent debate about sustainability.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.