The bull market run continued in May with the S&P 500 Index rising 5%, bringing YTD returns to 11%. International stocks, measured by the MSCI ACWI Ex USA Index, rose 4% and are now up 14% in 2026. Stocks in emerging market countries like South Korea and Taiwan surged more than 10% last month as demand for AI-related semiconductors skyrockets. Fixed income was little changed in May. Interest rates jumped as higher energy prices increased inflation expectations for the rest of the year.
Optimism around AI continues to fuel the current 3.5-year bull market. Since the end of 2022, the S&P 500 Index has doubled in value while the technology-focused Nasdaq 100 has increased more than 170%. The incredible performance in such a short period of time has understandably drawn comparisons to the 1990s dotcom bubble. Over the five years from 1995 through 1999, the S&P 500 rose roughly 250% for an annualized return of around 28%. In the current 3.5-year AI bull market, the S&P 500 has increased about 100% for an annualized return of roughly 22%. While the recent move in stocks has been very impressive, it has further to go in terms of both length and magnitude to rival the 1990s dotcom bubble.
The other key difference between now and the 1990s is earnings have largely kept up with surging stock prices. The S&P 500 Index is likely to produce around $350 in earnings per share over the next 12 months, nearly doubling from the 2022 EPS figure of $200. Further, AI heavyweights like Nvidia, Alphabet, and Microsoft trade between 20-30x forward earnings. Dotcom darlings like Cisco, Oracle, and AOL were all trading at more than 100x forward earnings in late-1999.
While the comparison between the 1990s and today may not be an exact match, risks do remain. Fear of missing out has led to massive rallies in more speculative areas of the market. In times like these investors should remember Warren Buffet’s famous quote: “Be fearful when others are greedy, and greedy when others are fearful.” Greed is certainly in the air, necessitating a diversified, risk aware approach to portfolio construction. We allocate to the AI winners while balancing that exposure with investments in value stocks, international equities, and fixed income securities. We believe this measured approach will serve clients well over the long term. As always if you have any questions regarding the markets or your portfolio, please reach out to a member of the Aurdan Capital team.
IMPORTANT DISCLOSURES
The views, opinions and content presented are for informational purposes only. The charts and/or graphs contained herein are for educational purposes only and should not be used to predict security prices or market levels. The information presented in this piece is the opinion of Aurdan Capital Management and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources, but we cannot guarantee the accuracy or completeness of the information, no liability is accepted for any inaccuracies, and no assurances can be made with respect to the results obtained for their use. The information contained herein may be subject to change at any time without notice. Past performance is not indicative of future results.