The current bull market, heavily influenced by artificial intelligence (AI), continues to show remarkable resilience despite various economic challenges. This strength has surprised many financial experts, including Fundstrat economic strategist Hardika Singh, who noted the market's ability to overcome significant headwinds. Technology, industrial, and utility sectors are leading this performance, while targeted exchange-traded funds (ETFs) provide exposure to specific emerging themes. Robust earnings growth is supporting new market highs, and a 'buy the dip' strategy has consistently rewarded investors, reinforcing overall bullish sentiment.
Key Takeaways
- The AI-driven bull market maintains strong performance despite economic and geopolitical concerns.
- Technology, industrials, and utilities are top-performing sectors, benefiting from AI infrastructure demands.
- Earnings growth is a significant factor, validating current market highs.
- 'Buy the dip' strategies have proven highly effective, especially for newer investors.
- ETFs offer diversified exposure to specific themes like uranium and AI-related infrastructure.
Market Resilience Amidst Headwinds
Hardika Singh, an economic strategist at Fundstrat, expressed surprise at the market's unexpected strength. She highlighted several challenges, including a government shutdown, rising tariffs, and increased geopolitical tensions. Despite these factors, the AI-driven bull market has shown no signs of slowing down. This sustained upward trend has defied traditional expectations, leading many to re-evaluate their investment outlook.
"I am just completely shocked by how strong this market has been even though there's been so many curveballs thrown at it," Singh stated during a recent discussion.
The market's ability to absorb negative news and quickly recover suggests a strong underlying confidence among investors. This sentiment is partly driven by the transformative potential of AI, which is impacting various sectors beyond core technology companies.
Leading Sectors and AI's Broad Impact
The AI revolution is not only boosting traditional tech giants but also creating significant demand in other sectors. According to Singh, technology and utilities are key areas for investors seeking alpha. The expansion of data centers, essential for AI operations, requires substantial power generation, directly benefiting utility companies.
Market Performance Snapshot
- Technology Sector: Continues to lead due to chipmakers and AI innovation.
- Utilities Sector: Among the top performers in the S&P 500, driven by demand for power generation.
- Industrials: Also seeing gains from infrastructure build-out related to AI.
Smaller companies tied to these themes are also experiencing significant growth. For instance, Credo Technology (CRDO), which produces electric cables vital for data centers, has seen its shares almost double this year. Bloom Energy (BE), a fuel cell company, has quintupled its share value by providing electricity solutions for high-demand applications. Oklo (OKLO), a nuclear energy play, has also surged, demonstrating the broad impact of AI enthusiasm across different industries.
The 'Buy the Dip' Strategy and Investor Behavior
A notable trend in the current market environment is the effectiveness of buying the dip. This strategy, where investors purchase assets after a price decline, has consistently yielded positive returns. Hardika Singh pointed out that this behavior is particularly pronounced among newer investors who entered the market after 2019.
Historical vs. Current 'Buy the Dip' Returns
Historically, since 1950, the S&P 500 advanced about 58% of the time in the week following a 2% or more daily drop, with an average gain of 0.6%. In contrast, recently, the S&P 500 has gained over 85% of the time in the week following a 2% or more daily drop, with an average rally of 2.6%.
This data suggests a significant shift in market dynamics, where declines are often shallow and quickly met with buying interest. This trend helps power the market to new highs, as investors are quick to seize opportunities created by temporary pullbacks. The rapid recovery after minor market corrections indicates a strong underlying bullish sentiment and a willingness to invest.
ETFs and Diversification in a Focused Market
Exchange-Traded Funds (ETFs) play a crucial role for investors seeking diversification in a market increasingly dominated by a few large tech players. September 2025 saw a record 115 ETF launches, a 55% increase from August, signaling bullish sentiment among ETF managers.
ETFs allow investors to gain exposure to specific sectors or themes without directly picking individual stocks. For example, the Global X Uranium ETF (URA) provides access to the uranium and nuclear energy sector, which is gaining traction due to increased power demands from AI data centers. This option is particularly useful for retail investors who might find it challenging to invest directly in complex commodities like uranium futures.
Singh also highlighted the return of the Roundhill Meme ETF (MEME), indicating a resurgence of interest in meme stocks. While individual stock picking remains an option, ETFs offer a convenient way to diversify and participate in broader market trends or niche sectors.
Economic Data and the Fed's Role
The economic data landscape has been complex and at times puzzling. Singh noted the difficulty in interpreting conflicting signals, such as a challenging job market for young graduates versus an optimistic overall economic outlook. The recent government shutdown further complicated matters by delaying key economic reports like nonfarm payrolls and CPI data.
The absence of crucial economic data can leave investors without clear guidance, contributing to market uncertainty. Despite these challenges, the Federal Reserve is expected to continue with rate cuts, with a 25 basis point reduction anticipated. This move aims to support economic activity and maintain market stability.
"If we go another month without data points being released, and the data points do get released after, say, that one month, and they're not good, the market would be in for a reckoning," Singh warned, emphasizing the potential for a market correction if negative data emerges after a prolonged blackout.
Gold's Rally and Long-Term Perspective
Gold has seen a surprising rally, reaching new highs, which has attracted significant retail investor interest. Many are drawn to gold as a diversification tool, especially given its performance relative to the S&P 500 since the turn of the millennium.
However, Singh advised a longer-term perspective. While gold has outperformed equities over the last 25 years, a broader historical view reveals that stocks generally outperform gold over extended periods. She cautioned against selecting specific timeframes to support a particular investment thesis, stressing the importance of a long-term investment horizon, often exceeding 25 years for most investors.
This perspective helps investors avoid short-term emotional decisions and focus on fundamental long-term growth trends, which typically favor equities.
Earnings Growth Sustains Market Highs
A critical factor supporting the current bull market is robust earnings growth. Hardika Singh highlighted that recent market highs are not merely speculative but are backed by strong corporate performance. In the third quarter, earnings are projected to grow by 8% year-over-year. Based on historical improvements throughout the quarter, estimates suggest an even higher 13% growth, marking the fourth consecutive quarter of double-digit growth.
This impressive earnings expansion is occurring despite various challenges faced by corporations, including tariffs, an uncertain consumer environment, and significant investments in data centers and AI infrastructure. Strong earnings provide a fundamental justification for elevated stock valuations and reinforce the bullish outlook.
For investors, Singh recommended a long-term approach, especially for those who entered the market recently. She advised against short-term timing attempts and emphasized buying quality stocks during dips, focusing on a multi-year secular bull cycle rather than immediate gains.
