Stock Market Bull Charges On, Question Is When It Meets the Bear

The stock market’s resilience in May 2025 has defied skeptics, with the S&P 500 notching its longest winning streak in nearly two decades. Yet beneath the surface, the bull market’s next chapter hinges on whether policymakers can tame inflation, investors can stomach bond market chaos, and companies can weather the storm of trade tensions. Let’s dissect the data.

The Bull’s Momentum: Tech, Tariffs, and Trade Talks

The S&P 500’s 9-day winning streak—its longest since 2004—was fueled by a mix of macro and micro factors. April’s strong jobs report (177,000 new jobs) and U.S.-China trade talks eased recession fears, while tech giants like Microsoft and Meta surged on AI investments. Microsoft, for instance, rose 2% in May as it unveiled a $20 billion cloud computing expansion, while Meta’s shares jumped 4% after OpenAI announced a partnership with its Instagram platform.

But not all corners of the market were rosy. Apple’s shares fell 4% after it warned tariffs could cost $900 million in Q2, and Amazon dipped despite strong earnings, spooked by similar tariff-driven profit headwinds. The reveal a 15% decline over the past year, underscoring how trade policies are now a key market variable.

The Bear’s Teeth: Bonds, Inflation, and the “Trump Put”

The real threats lurk beyond corporate earnings. The 10-year Treasury yield hit 4.32% in May—the highest since late 2022—amid a “flight from bonds” that’s upended traditional portfolio strategies. Historically, stocks and bonds have moved inversely, but this correlation has broken down, leaving investors scrambling. shows their inverse relationship fading, with both rising in tandem during May.

Inflation remains the wildcard. While the April jobs report was strong, wage growth (0.4% month-on-month) suggests underlying pressures. The Fed’s next move—another rate hike or a pause?—could tip markets. Analysts at Morgan Stanley note that 2025 is a “pause year” for the S&P 500, with single-digit gains expected. But a misstep here could reignite fears of a bear market.

Historical Context and Contrarian Logic

History offers some solace. Since 1950, 15% market declines like April’s have led to average one-year S&P gains of 14%. Even 20% drops (which occurred 12 times) averaged 19% rebounds. But exceptions like 2008 loom large.

Meanwhile, investor sentiment is eerily muted. Bank of America’s May sentiment survey showed optimism at 30-year lows—a contrarian signal. As Buffett’s Berkshire Hathaway (+19% YTD) demonstrates, defensive plays can thrive in uncertain times.

Navigating the Crossroads

Investors face a paradox: the bull is alive, but its next meal depends on resolving macro risks. The S&P’s rise to a target zone of 5,600–6,050 after April’s lows has lured buyers, but shows that rebounds often falter without earnings upgrades or policy clarity.

Conclusion: The Bull’s Last Lap?

The May data paints a market in suspended animation—resilient but fragile. The bull charges forward, fueled by contrarian buying and policy optimism, but faces three critical hurdles: inflation’s return, bond market instability, and unresolved trade wars.

The numbers tell the story:
- The S&P 500’s year-to-date decline narrowed to under 4%, a sharp rebound from April’s 15% drop.
- Tech’s AI rally (Microsoft, Meta) contrasts with tariff victims (Apple, Amazon), highlighting the market’s uneven recovery.
- The 10-year Treasury yield at 4.32% signals a bond market in revolt, with $9 trillion in U.S. debt maturing this year adding urgency.

For now, the bull holds the high ground. But as history shows, the longer the rally lasts without resolving these macro risks, the closer the bear’s shadow grows. Investors would be wise to tread carefully—this is a bull market that’s running on fumes, not fundamentals.