Markets and Economy Bonds, AI, and a bull market that has kept going
Brian Levitt
October 26, 2026
Markets and Economy Why the bull market may be changing, not ending
Key takeaways
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The bull market has continued despite reasons to worry, as broader market strength helped offset recent weakness in technology.
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Artificial intelligence (AI) demand remained strong, but massive spending has been raising the bar as many investors have increasingly looked for returns on those investments.
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Market leadership can change without ending the bull market. Rotation into other sectors may be a sign that the rally still has room to run.
Many investors have seemed to have spent much of this bull market fighting it. Among the things I’ve heard: Artificial intelligence is a bubble. Interest rates are too high. Inflation is too persistent. The Federal Reserve (Fed) is behind the curve and may ultimately need to tighten policy again. The midterm elections will prove disruptive.
Yes, there has been no shortage of reasons to worry. And yet the bull market has kept finding a way to carry on.
That may be the more important lesson from what has been happening beneath the surface today. Market leadership has been shifting, but so far, the shift looks to me more like a rotation than a deterioration.
Consider the breadth of the advance. Nine of the 11 S&P 500 sectors have been positive this year.1 Perhaps more telling, nine of the 11 sectors have also been positive this month, even as some of the steam came out of the technology trade.2 Non-US stocks are up more than 12% this year as well.3 Markets remained near their all-time highs despite some significant turbulence beneath the surface.4
Last week provided a particularly good example.
Strong AI demand and price tag
The message from technology earnings last week was somewhat paradoxical. Demand for AI remained exceptionally strong, but so does the investment required to meet it. Microsoft reported 48% growth in Azure, its strongest growth in two years.5 Amazon's AWS business grew roughly 39%.6 And Meta continued to demonstrate that AI investments have been improving engagement, advertising effectiveness, and revenue.7
The problem may not necessarily be the demand. It was the price tag.
The major technology companies continued to commit extraordinary amounts of capital to AI infrastructure. Across Amazon, Alphabet, Meta, Microsoft, and SpaceX, capital spending is projected to total roughly $803 billion to $828 billion this year, although not all that spending is directly related to AI.7 The immediate consequence has been pressure on free cash flow at some companies and growing investor scrutiny over how quickly those investments will generate adequate returns.
That strikes me as a healthy evolution.
For much of the AI boom, investors appeared to have largely rewarded companies for announcing bigger AI investments. Today they appear to be increasingly interested in what they’re getting for the money. That doesn't mean the AI opportunity has disappeared. It means the hurdle is likely getting higher.
Importantly, weakness in technology doesn’t appear to mean weakness everywhere else.
While some steam has come out of the technology trade, interest rates have moved lower8 and leadership has shifted toward other parts of the market.9 That’s what a durable bull market should be able to do. It doesn’t depend indefinitely on one sector, one theme, or a handful of companies.
Volatility doesn't mean the bull market is over
There will undoubtedly be more bouts of volatility. Questions about AI spending are legitimate. So are concerns about energy prices, inflation, and monetary policy. Markets have tended to climb walls of worry because the worries are real.
But investors shouldn't confuse every setback with the end of the bull market.
Sometimes the market may be doing something more constructive. It may be digesting excesses, repricing expectations, and handing the baton from one group of stocks to another, for example.
The market leaders can change without the bull market ending. The market's ability to withstand weakness in its former leaders while other parts of the market advance may be one of the better signs to me that this bull may still have room to run.
What to watch this week
Date | Region | Event | Why it matters |
|---|---|---|---|
Nov. 2 | US | Institute of Supply Management (ISM Manufacturing Index (Oct.) | Factory activity, new orders, and input prices offer an early read on manufacturing and inflation pressures |
China | RatingDog Manufacturing Purchasing Managers’ Index (PMI) (Oct.) | Factory sentiment in the world’s second-largest economy may signal the direction of global demand | |
Nov. 3 | US | Midterm elections | Election results may shape the policy outlook, while job openings offer a read on labor demand |
Nov. 4 | US | ADP employment report (Oct.) | Private hiring and services activity offer a preview of Friday’s jobs report and the health of the largest part of the economy |
Eurozone | Consumer Price Index (CPI) (flash, Oct.) | Early inflation data may influence expectations for European Central Bank(ECB) policy | |
Nov. 5 | US | Productivity and unit labor costs (preliminary, Q3) | Worker output and labor costs may signal whether wage growth is adding to inflation pressures |
UK | Bank of England interest rate decision and Monetary Policy Report | Policy decision and updated forecasts may signal the outlook for UK rates, growth, and inflation | |
Nov. 6 | US | Employment report (Oct.) | Payrolls, unemployment, and wages offer a key read on the labor market, while sentiment gauges consumers’ mood |
Canada | Employment report (Oct.) | Job gains and wage growth may inform the outlook for Canadian rates |
Related insights
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Markets and Economy Above the Noise: Perspective on bubble fears
Brian Levitt
October 23, 2026 -
Markets and Economy Are we there yet? Bull market may have more miles
Brian Levitt
October 19, 2026 -
Markets and Economy The surprising case for investing when the Fed’s raising rates
Brian Levitt
October 19, 2026
Important information
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Image: Martin Ruegner / Getty
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Past performance does not guarantee future results.
Investments cannot be made directly in an index.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Artificial intelligence (AI) technology companies are sensitive to specific risks such as small markets, business cycle changes, economic growth, technological progress, obsolescence, and regulation. These companies may have limited products, markets, resources, or personnel, making their securities more volatile, especially for smaller start-ups. Rapid technological changes can adversely affect their results. AI companies often rely on patents, copyrights, trademarks, and trade secrets to protect their technology, but there's no guarantee these protections will be sufficient. Significant research and development (R&D) spending doesn’t ensure product or service success.
A bull market is an environment in which stock prices are rising or are expected to rise.
Businesses in the energy sector may be adversely affected by foreign, federal, or state regulations governing energy production, distribution, and sale, as well as supply-and-demand for energy resources. Short-term volatility in energy prices may cause share price fluctuations.
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The Consumer Price Index (CPI) measures the change in consumer prices and is a commonly cited measure of inflation.
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Free cash flow (FCF) is a measure of financial performance calculated as operating cash flow minus capital expenditures.
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The health care industry is subject to risks relating to government regulation, obsolescence caused by scientific advances, and technological innovations.
Inflation is the rate at which the general price level for goods and services is increasing.
The ISM Manufacturing Index is based on Institute of Supply Management surveys of manufacturing firms in the US and monitors employment, production, inventories, new orders, and supplier deliveries.
Investments focused on a particular industry or sector are subject to greater risk and can be more impacted by market volatility than more diversified investments.
The Job Openings and Labor Turnover Survey (JOLTS) from the US Bureau of Labor Statistics produces data on job openings, hires, and separations.
The MSCI All Country World (ACWI) ex USA Index is an unmanaged index considered representative of large- and mid-cap stocks across developed and emerging markets, excluding the US. The index is computed using the net return, which withholds applicable taxes for nonresident investors.
Many products and services offered in technology-related industries are subject to rapid obsolescence, which may lower the value of the issuers.
The Michigan Consumer Sentiment Index is published monthly by the University of Michigan, based on a telephone survey designed to assess US consumer expectations for the economy and their personal spending.
Monetary easing refers to the lowering of interest rates and deposit ratios by central banks.
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