The Bull Run Everyone Hates — And Why It's Not Going Anywhere

A lot is happening in the financial system, so I’d like to start this week’s market update with an overview of the macro environment as well as the dominant themes currently playing out in the markets.

Macro Environment

1. The Trump administration is currently engaged in a “run it hot” economic framework. This entails pursuing growth at all costs, even if doing so risks another round of inflation. To accomplish growth the Trump administration is:
2. 1. Running a fiscal deficit equal to 5% of U.S. GDP. This is the kind of fiscal spending typically associated with cushioning an economic contraction. But the Trump administration is employing it during a period in which the economy is still growing.
3. 2. Actively seeking out new means of economic stimulus.       
      1. Cutting regulations and permitting processes for mining, manufacturing and other industries deemed critical to national security.
      2. Altering tax structures (the Big Beautiful Bill) to increase refunds while also allowing for greater deductions (R&D and equipment can now be fully expensed resulting in a capex boom).
4. 3. Pushing for monetary easing by the Federal Reserve:
      1. Trump’s newly appointed Fed Chair Kevin Warsh has clearly aligned himself with the President’s objective of lower rates.
      2. The Trump admin has now appointed three out of the seven Fed Board of Governors (Warsh, Bowman and Waller). If the President succeeds in forcing Jerome Powell and/ or Lisa Cook to leave that number increases to four or five meaning the President will have successfully co-opted the Fed’s leadership.

2. The U.S. economy is currently K-shaped with the bulk of consumer spending/ economic growth coming from the top 10%.
3. 1. The top 10% of incomes are doing well due to higher earnings as well as the wealth effect (people are more likely to spend money when they “feel” richer due to higher asset prices and stocks and real estate are at all-time highs).
   2. The lower 90% and especially the lower 80% of incomes are struggling right now due to increased costs of living (multiple U.S. corporations, e.g.  Kraft Heinz, Whirlpool, McDonald’s, and Dine Brands have warned that households are depleting savings and accumulating debt to cover rising essential costs).

3. The U.S. was risking another round of inflation before the War in Iran began. Now that the War has resulted in a spike in energy prices/ supply chain disruptions, another inflationary storm is brewing.
4. 1. The Fed’s preferred inflation measure is the Core-Personal Consumption Expenditures (Core PCE). Core PCE has 178 components within it. Some 54% of these components are clocking in at over 3% up from 45% this time last year.
5. 2. Oil prices have been over $90 per barrel for two months now. This will have a ripple effect in that:
6. 1. 1. Energy prices were the only component of the inflation data that were negative. Everything else was still rising in price, albeit at a slower pace (which is why Year over Year inflation data was falling).
      2. Energy prices are an input for every other industry. There is a lag time of six to eight weeks before this really impacts things. So, the secondary and tertiary effects of higher energy prices have yet to be fully felt in the economy.
7. 3. Bonds are finally beginning to react to this situation.
      1. The yield on the 2-Year U.S. Treasury is at 4.1%. With the Fed Funds Rate at 3.5% this means the market is forecasting two rate HIKES in the next 24 months.
      2. The yield on the 30-Year U.S. Treasury has broken above 5% and is now trading at the Biden inflation highs of 2023.

Market Structure:

1. Our current framework is that the stock market is in a new bull market that began in April 2025. The first leg up occurred from April 2025 through February 2026. That leg up ended with a 10% correction that played out from late February through late March 2026.

2. This bull market is being driven by fundamentals.

1. 1. S&P 500 forward sales growth is projected to hit 18% over the next 24 months.
   2. The Artificial Intelligence (AI) buildout is driving both capital expenditures ($600 billion per year) and earnings.
   3. As Warren Pies notes, earnings estimates are growing in unprecedented ways with forward estimates up 25% YoY. This is greater earnings growth than stocks experienced during the 1990s.

3. Stocks are fundamentally an inflation hedge. Higher rates of inflation will benefit stocks because sales are recorded in nominal (not inflation-adjusted) terms. This will continue until Higher operating costs eat into profits.

I know this is a lot of information, but the current environment is a complicated one. There is certainly no shortage of potential issues that could derail things, but the current market structure and overall macro backdrop remain supportive of stocks and risk assets in general.

Having said that, this is an extremely hated bull run. Everywhere I look I see gurus and strategists calling for another major correction or ever a crash. The odds of this are EXTREMELY low due to market strcture.

Let me explain.

Why Another 10% Correction is Unlikely Right Now

The conditions that trigger a -10% correction need time to rebuild after one just happened.

Specifically, four things need to deteriorate simultaneously to produce a -10% drawdown:

1. Positioning — institutions need to be re-loaded with risk before they can unwind it again
2. Breadth deterioration — the advance/decline dynamics need time to weaken from a healthy state back to a vulnerable one
3. Volatility regime transitions — VIX and volatility structure need to cycle through compression and expansion phases
4. Sentiment extremes — fear needs to fully dissipate, and greed/complacency needs to rebuild to levels that make the market fragile again

These processes take months, not weeks to occur. Yes, another 10% correction can happen in the markets… but it is months away after institutions are fully loaded up on stocks, breadth has started breaking down badly, volatility has reached levels of extreme complacency and sentiment is at bullish extremes.

Right now, one of those items are in place, the other three are not even close.

First and foremost, positioning IS extreme. According to the latest BofA Global Fund Manager Survey, global equity allocations just surged from a net 13% overweight to a net 50% overweight in a single month. That is the largest single-month jump ever recorded. And the highest overall equity allocation since January 2022. So financial institutions are “all in” on stocks.

Regarding breadth, the percentage of S&P 500 companies trading above their 50-DMA is at a healthy level of 50%. As the below chart shows, this is nowhere near the extreme reading that usually precedes a top: usually tops leading to 10% corrections are preceded by 70% of even 80% of S&P 500 companies trading above their 50-DMAs.

Regarding volatility, the vol regime just FULLY RESET. We went from a 35 VIX panic to a 17 VIX recovery. For vol to build the conditions needed for another -10% drawdown you need months of complacency — VIX grinding back down toward 12-13, term structure flattening, hedges being stripped off. NONE of that has happened yet.

VIX at 17 is not complacency. It's a market that just got punched in the face and is still slightly on guard. That's actually the sweet spot for equities — fear has receded enough to buy but hasn't collapsed enough to signal the next top.

And finally, sentiment remains quite bearish. The American Association of Individual Investors (AAII) survey shows 43% of investors are bearish on stocks over the next six months. This is well above the historical average of 31%. Moreover, only 31% of investors are bullish on stocks. Market tops that precede corrections of 10% usually occur after 45+% of investors are bullish.

Put simply, while positioning in stocks is extreme, neither breadth, nor volatility, nor sentiment are anywhere near the levels the market needs to trigger another 10% correction. This doesn’t mean that stocks can’t dip or drop… simply that the odds of a 10% correction hitting right now are EXTREMELY low.

As I stated at the beginning of this update, there are times when you need to dive deep into what is happening in the financial system/ economy and times when you need to keep things simple and focus on the trend. Today, the trend is up, and the best thing to do is keep things simple and just ride this move for as long as possible.

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Best Regards

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research