Is the US Bull Market Real or a Fake-out?

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The news this week has been absolutely dominated by coverage of Donald Trump being officially charged by the Department of Justice over that whole classified documents thing, but while that whole media circus was happening, it buried a far more interesting (to me, at least) story in the back pages. Namely…

Wall Street is feeling bullish again.

The S&P 500 rallied Thursday to end the day in a bull market, marking a 20% surge since its most recent low, reached on October 12, 2022. That brings to end the bear market that began in January 2022.

It’s official. We’re in a bull market. CNN

Huh? Wha? I thought we were supposed to be entering a recession! What the heck happened?

The Year of the Question Mark

2023 has been the year that nobody seems to be able predict with any degree of accuracy.

Remember, we started 2023 with every major media outlet predicting a recession. Maybe it would be a major one, maybe a shallow one, maybe at the beginning of the year, maybe near the middle, but the question was never if, it was when and how bad.

I struggle to recall a year when literally every economist agreed on the same thing. The pretty steady drumbeat of bad news seemed to confirm what we were all thinking. Interest rates had risen faster than at any other time in history, the tech sector was laying off workers, and then mid-sized banks started falling over. First Silicon Valley Bank, then Signature, then First Republic. And then, as if all that wasn’t enough on our plate, the US looked like it was headed into another self-inflicted financial crisis, this time in the form of a debt ceiling debacle that almost caused a first-ever default by the US government.

So many signs were pointing to rough times ahead, and yet through it all, jobs kept getting created both in the US and in Canada. The latest US employment data showed the US creating 339,000 jobs for the month of May, easily beating economist’s expectations of 190,000.

Payrolls in the public and private sector increased by 339,000 for the month, better than the 190,000 Dow Jones estimate and marking the 29th straight month of positive job growth.

Payrolls rose 339,000 in May, much better than expected in resilient labor market,

While this result came as a shock to most of the talking heads in the media, I’m not totally surprised personally. Since we’ve been investing, we’ve gone through a number of economic expansions and contractions, and while every recession is different, the one common factor about recessions is this:

Nobody seems them coming.

Recessions tend to come from sharp over-reactions to unexpected events. The last recession (2020) happened because of the pandemic. The one before that (2008) was due to the housing crisis. And the one before that (2000) was due to the dot-com bubble bursting.

So when every market prognosticator agrees on the future direction of the stock market, it tends to go in the opposite direction. Remember the long-awaited “Roaring 20’s” rally that was supposed to happen when the pandemic was over in 2021? Whatever happened to that?

There’s actually a Wall Street saying that describes this. It goes “Bull markets climb a wall of worry.” Meaning that bull markets tend to form when everyone’s worried that a crash is around the corner, not when everyone’s hopeful and optimistic. And boy is everyone still worried. I mean check this out…

The Yield Curve

This is how yield curves are supposed to look.

This is a chart of all the different interest rates the central bank is offering for lending it money in the form of bonds for a certain amount of time. Under normal, expansionary times, the line looks like the blue one. Money that you store in a short-term savings vehicle, like a savings account, pays relatively low interest. But if you’re willing to lock in your money for a certain amount of time, you can buy a bond with that duration and it would pay you a higher amount of interest to compensate you.

This is today’s US treasury yield curve.

It’s looking extremely inverted. Inexplicably, you can get a pretty decent interest rate above 5% to lend the government money for 1 month, yet a 5 year bond pays less than that.

That doesn’t make sense, and that’s why these shapes are abnormal right now. These things happen when there’s widespread expectation of a recession (like right now). Money floods into the bond market because people are scared and bonds are seen as a safe investment during scary times, but this keeps bond prices artificially high, which creates these distortions in the yield curve.

So here we are in a strange situation where economic indicators are pointing in different directions. Stock markets are up, yet the bond market is still predicting an imminent recession. Which is correct?

Facts vs. Expectations

I think this is a classic “wall of worry” scenario.

Naysayers will point to things that are “different” about this bull market, namely the fact that this advance is relatively narrow and concentrated in the mega-cap tech stocks like Meta, Apple, Amazon, and other companies who are benefitting from big bets on AI. And overall, people are still feeling pretty glum about the economy in general if you due to persistently high inflation, but actual metrics of economic performance paradoxically indicate that we’re in an expansion, not a contraction.

The stock market, which is typically a leading indicator of the direction of the economy, looks positive. GDP, which is a current indicator, is currently positive, having increased in Q1 by an annualized 1.3 percent. And as mentioned earlier, hiring (which is typically a lagging indicator) continues to be stronger than anyone anticipated, with unemployment still hovering below 4%.

It’s actually pretty rare for all 3 indicators to line up at the same time. Combine that with the news that the debt ceiling crisis got resolved without the US going into a catastrophic default, and I’m more inclined to believe that this bull market has legs.

Return of the Bulls

If this bull market sticks around, that’s welcome news for the FIRE community. After a pretty crummy 2022, stock investors around the world can look forward to some recovery. And even though the S&P 500 is still a ways off from its previous peak which was hit in January 2022, if you were investing throughout last year as stocks were selling off, you were picking up units on sale. That means you’ll be able to ride the recovery up faster than when it went down, which is how we pulled ourselves out of the Great Financial Crisis in 2008/2009.

The average bull market on the S&P 500 lasts about 5 years, and gain, on average, 177.8% cumulatively during that period. Even the shortest bull market, in 1932, lasted 98 days (source: nerdiness), and it still gained 111%.

Does that mean the S&P 500 will go up straight up over the next 5 years? Of course not. The stock market, whether it’s in bull or bear mode, will always be unpredictable in the short term. But again, if this bull market sticks around, index investors like all of us should be in for an interesting ride.


To those just starting out in investing, this might seem a little crazy. How can stock markets be doing well when all this bad stuff is going on in the news? But to more seasoned investors, this is actually par for the course.

The stock market exists in two extremes:

  1. Everything’s about to crash, you’d be an idiot to invest now
  2. Everything’s way too expensive, you’d be an idiot to invest now

That’s why you can’t rely on the news to figure out when would be a good time to invest. It’s never going to “feel” like a good time to invest. That’s why the only way to to do it is to invest when you have the money, and do it automatically so you don’t get freaked out by day-to-day market gyrations.

After all, the people who are best positioned to benefit from the bull market that’s emerged are the ones that put money into the markets during 2021, when it felt like that was setting your cash on fire. That’s how it always goes.

It never feels like a good time to invest, until it is.

So what do you think? Do you think this bull market is a turning point in the economy, or is it all a fake-out with more pain coming ahead? Let’s hear it in the comments below!

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33 thoughts on “Is the US Bull Market Real or a Fake-out?”

  1. According to our own portfolio data, which is mostly invested in the stock market (data:, we hit a local bottom last September, and since then, it has been going up, up, up. We haven’t looked up the performance for the past few weeks, but as of June 1st, things were already looking pretty good (which was surprising to us as well). We also like getting these juicy interest rate into our savings accounts (pretty good at 5% APY!)

    It’s hard to tell, though, how long this “bull run” will last. As early retirees, we don’t care too much about these fluctuations. We retired 5 years ago, so at this point, the market would have to crash really hard for us to worry about running out of money.

    And I’m pretty sure you guys are in the same boat, right?
    Though it is a great analysis to read!

    1. Yeah, same here. My local minimum was end of Sept/beginning of Oct, and from that bottom we are up overall about 13%. That was super surprising, because all I’ve been hearing this year is how a recession is just around the corner…

  2. The news keeps saying the lack of breadth in the Market is why all the caution…but look at the RSP. It is about to break out. I have been Bullish since late April and am up 12% since that time. I will now be confident to buy any 10% pullbacks. And according to the WSJ, puts are at an all-time high. So a major short squeeze could happen. Will have to see Tues and Weds when Inflation and the Fed have ther data points released.

  3. So question- with interest rates looking the best they have been for a while for CD’s and high interest money market accounts, does it make sense to put the money that would normally be in bonds into these fixed return accounts?

    I recently left a job and am rolling over a 401k, so I now have more flexibility for the funds I choose. A fixed 5% return looks pretty good compared to a flat or dropping bond index fund BND with 2.7% yields. I don’t know if the Fed not hiking interest rates stabilizes bonds and will cause them to start to bounce back. Logically makes sense… currently, I split my non-stock index allocation between the BND index fund and CDs.

    1. I think hiding out in the short end of the yield curve is a good move. It makes no sense that CDs are paying out more than bonds right now, and eventually that’s got to correct in my humble opinion, but for now I’ll take the zero-risk 5% over a risky 2.7% any day.

  4. Things are looking good. I’m ashamed to admit it, but I’ve actually dump some $$ into 1-yr CDs at 5.4%.

    Short/immediate term risk seem to be more geopolitical, such as Russia using a nuke in Ukraine or similar.

    1. Hey, 5.4% ain’t bad at all. I’m trying to get my fixed income from preferred shares at 6%, but that ride’s been super volatile all year.

  5. I always enjoy reading your commentary on the markets – very level headed! And I do remember those roaring 20s predictions too. Funny how things work out. Markets do what markets do, I just keep my money invested for the long term. I am wondering about locking in a high percentage CD though as I am enjoying these unexpected monthly interest payouts and I expect interest rates ‘May’ start to fall soon 🤷‍♀️

    1. A CD at 5%+ is nothing to sneeze at. Personally, I’m not convinced that interest rates are going to fall any time soon, but if you’re going to be in a CD, your duration is going to be quite short anyway, so if interest rates drop you’ll get a (smallish) capital gain, and if they stay high you can just roll it over to a new CD then.

  6. Keep investing. That’s the key. You don’t have to overthink it.
    IMO, this bull market will be short-lived. Personal debt is at an all-time high. Inflation is still high. AI will start taking jobs soon. I don’t think this bull market can last.

    1. If you think personal debt is bad in the US, you should see the stats in Canada. I think our household debt levels are the highest in the G7!

  7. I agree with you when you say most people should stay invested and not care about the news and market timing. Only experienced investors and entrepreneurs should invest actively.

    I was one person on your blog predicting a recession last year.. and I also predicted that the stock market would go up ! (?)

    If you find that strange, here’s the reason why it’s doing so :

    First, the recession has already started. It had started in Q4 last year in Germany and had been confirmed three weeks ago (May 25, 2023). Here is an article about this :

    Other countries’ economies look very weak and recession is now more likely than not (China, UK, France). It remains to be seen if Japan, USA and Canada will follow, but the more countries falling into recession, the higher the odds other countries will eventually fall in a recession as well.

    Second, now that we are entering in a recession, the likelyhood of interest rates going higher and staying high for longer period of time have reduced. We see that in the 10y US bonds yielding around 3.75%, meaningfully below the Fed funds rates of 5.25% (minus 1.5%!).

    A recession also rise the likelihood that governments will spend even more on grants and subsidies in the future. In other words, more money printing coming out to the markets … ! We can see that in the huge governments’ deficits and always increasing government debt.

    That is positive for the stock market. More money going to consumers and companies means more revenues for companies, at least, for the companies benefiting directly or indirectly from the money printing.

    In conclusion, I don’t think that a recession and a rising stock market are contradictory. In fact, in an inflationary recession, a rising stock market is very normal.

    So, it’s better to get used to it ! The stock market is going to rise and continue to rise. The recession should also get worse if we stay in a stagflation environment for a meaningful period of time.

    The biggest losers in this environment will be fixed income investors (don’t buy too many bonds) and fixed income earners (employees, pensioneers).

    Hope my comments can be of any help. Thank you for sharing your thoughts on investing.

    1. Yeah, Europe is definitely in a recession, and yet IEFA is up 30% trough-to-peak, so it’s in a bull market too!

      However, I’m not convinced central banks will be too eager to drop interest rates if inflation isn’t under control yet.

      1. We shall see.. the narrative can change quickly !

        If we are officially in a recession in the US and that inflation come down meaningfully, soon they will tell everybody that they need to stimulate the economy and that they can’t let prices go down too much …

  8. I’ve been extra motivated to save, given the high interest rates and rising stock market.

    In addition to maxing out my 401k, HSA contributions and buying VTI in tranches, I have been stuffing monies into CDs, T-bills, and high yield savings accounts like there’s no tomorrow — all at 5% + interest rates.

    You would be just plain stupid to spend any money now.

    There’s such a dis-incentive to do so.

    Super-charge your savings is the name of the game, my friends .

  9. If you are embarking on the FIRE 10, 15 or 20 years journey…
    Do not let the BULL or the BEAR distract you…

    1. Save hard – 40%, 50% or 60% of your earnings
    2. Stay invested in the market (BULL or BEAR) – you will see the exit sign at the 20th, 15th and 10th year

    Most importantly, have fun doing it and let the power at hands worry about the ECONOMY.

    Good luck everyone!

    1. That’s definitely true. The presence of a bull market isn’t actually affecting my investment strategy, because if you’re on the FIRE path, you can’t dance in and out of the market.

  10. I recall a Youtube video from Ben Felix named “The Stock Market vs. The Economy” where he states that there is actually a negative correlation between the stock market and the economy. It would explain the current situation quite well.

  11. Well “IF” this is a real bull it came earlier than I expected. I was thinking not until maybe December 2024 (using previous rebounds as a guideline). But hey predictions are notoriously wrong and most of the news tries to attribute recent events to actual market changes. I am always very skeptical of the actual cause and effect that is suggested. There are macro trends in the market (time of month, time of year, etc related to quarterly reporting and central bank announcements) for general ups and downs but those are also just trends and aren’t great at timing buys and sells. Overall trend is up which means you gotta buy in eventually or you will miss out for sure.

    1. That’s true. Long-term direction of the S&P500 is always up and to the right, yet people are so scared of investing because it “feels” like gambling.

      1. These people should buy a balanced fund, and contribute with every pay check, and never look at it. They will be better off. My brother does exactly that, has 0 knowledge of stocks/bonds and no idea where the economy is at. Sleeps great at nite.

  12. This is such an interesting moment in history to invest in the stock market. As long as your investment horizon is long term, I think this opportunity is too good to pass up. It’s interesting how when the stock market is bullish, one is afraid to invest because it’s too high, but when the market is bearish, one fears it’ll only keep going down. The solution? Always be buying, which will be my motto going forward. Here’s to FIRE!

  13. Yeah meanwhile I kept investing and 2022 is just showing as a small blip in my chart…my portfolio today 6/16 is at all time high again!!!

  14. Hi,

    I ignore the news and invest on a monthly basis.
    It gives me the peace of mind as my focus is on the generated dividend covering my expenses which is flexible.


  15. Thank you for your hard work on this blog, I have been reading since 2018 and deeply respect and appreciate it.

    “The average bull market on the S&P 500 lasts about 5 years, and gain, on average, 177.8%”

    Hope you are right in this one…

    I’m “Half Fire” right now but also been laid off from work. I’m 46 but no hurry for a new job (sick of it), I do have 5-6 years of living expenses covered (unemployment beneffits, severance pay and savings).

    Maybe I’m FIRE without knowing it…

    Thank you and sorry for my english 😉

  16. Anything can happen, so be prepared for it. Up/Down, doesn’t matter. The only difference this time around is you can afford to put money in cash (T-Bills, GIC”S) as you are finally getting some return on your money. This hasn’t happened in years.

    Nobody can foresee a Recession, but the facts on the table are this:

    – rates are too high, and people will suffer, soon (mortgages) and that will have an effect
    – rates are very close to topping out as inflation is coming into check, so the drop in
    bond values, and the inversion will soon abate. bonds will look more attractive.
    – there is always strength in good companies that pay dividends.
    – you can afford to hord some cash and still make money, if in fact stocks drop, buy more of them. If not, buy anyway. You win both ways.

  17. I’m not sure what my true motivation was, but holding stocks for the past few years has really hurt. I spent time trying to figure out if the rates drop will bonds really increase in value? How is it that bonds go down in value when rates go up and the down in value when rates go down. Turns out I don’t understand bonds at all! I went all in 100% on equities (7 figures invested) and it’s sure worked out over the last 6 months! Wishing I saw that coming instead of starting a new brick and mortar business and stepping out of early retirement after a few years off. I thought shit was about to get real.

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