Just now, the current U.S. stock market bull run marked its "third anniversary," against the backdrop of a "plunge" on Friday.

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Just on Sunday (October 12), the current U.S. stock bull market that began in October 2022 marked its third anniversary, during which the S&P 500 index has risen by 83% in total, adding about $28 trillion in market value. However, as this milestone arrives, investors are hotly debating whether U.S. stocks have risen too far, too fast.

Just as the current bull market in U.S. stocks was marking its “third anniversary,” last Friday (October 10) saw a sudden sell-off sparked by Trump’s threat to impose a “sharp increase” in tariffs on imported goods, triggering the S&P 500 index's largest single-day drop since April 10.

Even so, the index is up 13% over the past 12 months, double the average gain for the third year of a bull market. According to CFRA Research, the gains of the current bull market over three years are already equivalent to the average gain of a bull market over four years in history.

This has pushed the S&P 500’s price-to-earnings ratio (P/E) to 25 times, a record for the third year of a bull market. “I’ve never seen anything like this,” said Sam Stovall, chief investment strategist at CFRA.

However, historical data shows that of the 13 bull markets since World War II, 7 continued into a fourth year, with an average cumulative gain of 88%.

Valuations Hit Record Highs, Market Concentration Risks Stand Out

The standout feature of the current bull market is the rapid rise in valuation levels. The rolling P/E ratio of the S&P 500 has reached 25 times, a record high for the third year of a bull market. By comparison, valuation levels in the third year of previous bull markets were much milder.

Stovall points out that while history suggests the market is not yet overstretched, this means gains need to return to more reasonable levels soon.

He expects that 2026 could be a tough year for U.S. stocks due to expensive valuations, tariffs and economic concerns, as well as the policy uncertainty volatility that often comes with midterm election years.

The S&P 500 index has recorded gains of over 20% in each of the past two years, the first such occurrence since the late 1990s. With valuations near historical highs, some investors are beginning to consider whether they should cut back on their stock positions.

In addition to record high valuations, a key risk of this bull market is over-concentration in a handful of tech giants. Nvidia has soared nearly 1,500% in the past three years, Meta Platforms is up more than 450%—these tech giants have driven the entire market’s rally.

However, a large number of stocks have lagged behind. The equal-weighted version of the S&P 500 has trailed the market-cap weighted version by 21 percentage points since October 2022, the biggest underperformance at the start of a bull market since at least the 1990s.

Jurrien Timmer, head of global macro at Fidelity Investments, said that this situation is unusual because bull markets typically see broader participation in the early years as the Fed cuts rates to support the economy.

But this time, on the contrary, central banks raised rates in 2022 to curb inflation, leading to narrow concentration. The so-called "Magnificent Seven" tech stocks now account for a record one-third weighting in the S&P 500 index.

Professional Investors Remain Cautiously Optimistic

Despite the risks, few professional investors are predicting the arrival of a bear market.

Renowned stock market bull and author of the “Paulsen Perspectives” newsletter, Jim Paulsen, believes:

If things worsen, the Fed might step in. He is betting that participation will broaden to equal-weighted and small-cap stocks, and that there will be some bumps after three years of outsized gains.

Patrick Fruzzetti, portfolio manager at Rose Advisors, suggests now is a good time to rebalance portfolios. He is underweight in technology and has shifted to buying beaten-down healthcare stocks, including lower-valued life sciences and diagnostics firms.

If you’ve benefited in recent years from the huge gains of large tech stocks, it now makes sense to focus on other sectors that would benefit from rate cuts, Fruzzetti added.

Historical data provides support for stock market optimists.

According to CFRA statistics, since World War II, bull markets have lasted an average of 4.6 years, with total returns from the S&P 500 of around 157%. The current bull market has just passed its third anniversary with an 83% return, so theoretically the market still has ample room to rise. Timmer says:

"There’s no sign that the stock market has entered dangerous territory. The bigger risk is if yields climb to 5%, forcing a reset in valuations—or if the AI boom turns into a bubble, possibly sparking a sharp selloff. So broadening market participation from here is crucial."

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