The S&P 500 Is Near Record Highs: But Most Stocks Are Already in a Bear Market

Although the S&P 500 is inches away from a record high, the picture looks dramatically weaker beneath the surface. The analysts at the Kobeissi Letter argued that Wall Street is in a rare “bull-bear market,” with key indices, such as the S&P 500, hovering near record highs even as most of its components trade well below their peaks. The KL’s analysis believes this divergence could eventually fuel another powerful rally if inflation, energy prices, and interest-rate pressures ease. The Contradiction The apparent discrepancy comes after a dramatic deterioration in the macro backdrop. At the start of the year, markets expected at least three Fed rate cuts. Instead, the central bank hiked rates in September, and current expectations imply another three increases by June 2027. This translates to a 175-basis-point swing in the expected policy path. At the same time, Brent crude skyrocketed to $106 per barrel, diesel has surged more than 80% from its January lows, and inflation remains almost 2x higher than the Fed’s target. According to the KL, this contradiction stems from extreme market concentration. The analysts found that 84% of S&P 500 companies are at least 10% below t...