are stocks going to keep going up? A guide

A balanced, data-driven guide answering “are stocks going to keep going up” by summarizing recent drivers (earnings, AI capex, policy), bullish and bearish scenarios, risks to watch, and practical ...

2025-12-24 16:00:00

By Lily Wong

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Are stocks going to keep going up?

Asking "are stocks going to keep going up" is a common investor question after multi-year gains. This article gives a concise, evidence-based overview: the forces that pushed markets higher recently, the arguments for continued gains, the major risks that could stop or reverse the rally, and the near-term indicators investors and analysts watch. It is neutral, aimed at beginners and intermediate readers, and explains terms where needed. You will leave with a scenario-based framework—not a prediction—so you can interpret market signals and consider how different outcomes affect investment decisions. Explore Bitget features and market tools to monitor these indicators in real time.

Summary answer (short)

There is no certainty that stocks will keep rising; only probabilities. The bullish case rests on continued corporate earnings growth, heavy AI-related investment and capital expenditure from large technology firms, and a policy environment that looks less restrictive than in prior tightening cycles. The bearish case centers on macroeconomic weakening (recession risk), inflation surprises, a less-accommodative Fed than markets expect, concentrated market breadth and an "AI disappointment" where investment fails to meet lofty expectations. Monitoring earnings revisions, market breadth, interest-rate signals and Fed communications gives the best near-term read. Ultimately, the answer to "are stocks going to keep going up" depends on how those variables evolve.

Background and historical context

Recent market performance: U.S. equities have posted strong returns in recent years, with large-cap indexes benefiting especially from a handful of mega-cap technology companies and an AI-led rotation in 2025. For example, parts of 2025 showed double-digit gains driven by AI optimism and megacap leadership (some reports reference about a 16% AI-led rally in the S&P 500 in 2025). As of mid-January 2026, market participants continued to debate whether momentum can continue into 2026.
Bull vs. bear market definitions: A bull market is commonly described as a 20% or greater rise from a market trough; a bear market is a 20% or greater fall from a peak. Shorter corrections (5–20%) are normal within both regimes. Importantly, market regimes are identified in hindsight: a seeming continuation can still be interrupted by macro shocks.
Historical patterns after strong runs: Past multi-year rallies have continued when gains were supported by earnings growth (real expansion of profits) rather than solely by valuation expansion (higher price-to-earnings multiples). Rallies driven mainly by multiple expansion can be more fragile, especially if interest rates rise or earnings disappoint. Conversely, rallies supported by broad earnings improvement and expanding revenue are more durable.

Recent drivers of the rally

Earnings growth

Corporate earnings have been a key fundamental anchor for stock prices. Rising earnings per share (EPS), upward analyst revisions, and stronger guidance from large companies help justify higher equity valuations.

What to watch within earnings: Analysts often track cap-weighted vs. median (or equal-weighted) earnings. Cap-weighted metrics can be skewed by mega-cap leaders: if the largest names show outsized profit gains, the market-cap-weighted EPS growth looks stronger than the typical company’s results. Median or equal-weighted earnings paint a clearer picture of the breadth of profit growth across the market.
Recent evidence: In late 2025 and early 2026, large banks and technology suppliers reported strong quarters tied to dealmaking and AI-related demand, which lifted headline profits for the market. As of 2026-01-15, several major investment banks and chip suppliers reported results that exceeded consensus and raised near-term expectations (source: Reuters/Bloomberg coverage of corporate earnings releases).

Technology and AI investment

A dominant narrative for the recent rally has been AI-related capital spending and product adoption. Companies are investing in data centers, custom chips, cloud services and software re-development to incorporate generative AI and large-model workloads.

Capital intensity: Large chipmakers and equipment suppliers signaled stepped-up capital expenditure. For example, Taiwan Semiconductor Manufacturing Company (TSMC) reported a ~35% jump in Q4 profits and announced plans to increase capital spending to roughly $52–$56 billion for 2026 (as reported). That scale of investment supports a multi-year demand path for suppliers and equipment makers.
Market effects: Public enthusiasm for AI has lifted chipmakers, cloud providers and software firms tied to model training and inference. This expectation can create a positive feedback loop where higher equity valuations fund further investment and M&A.

Monetary policy and interest-rate expectations

Interest rates and central bank communications materially affect equity valuations. Lower expected policy rates tend to raise equity valuations by reducing discount rates used in valuation models and by improving investor risk appetite.

Rate-path expectations: Market pricing of the Fed funds path — in particular the timing and number of rate cuts — influences risk assets. Short-term Treasury yields and Fed futures reflect these expectations; rapid shifts in those expectations can trigger volatility.
Bond yields and term premium: The 10-year Treasury yield and the shape of the yield curve (e.g., two-year vs. ten-year spread) are important. A declining 10-year yield typically supports higher price-to-earnings (P/E) multiples; a rising yield compresses multiples unless earnings growth outpaces the rise.
Recent context: Markets priced in a non-trivial probability of policy easing in 2026, but comments from key officials and political developments have sometimes reduced the expected number of cuts (for example, short-term yields briefly rose after notable policy remarks in early 2026). These swings underscore sensitivity to communications and forecasts.

Fiscal and tax policy

Fiscal choices (tax changes, infrastructure spending, incentives) and corporate tax expectations affect after-tax corporate profits and investor sentiment.

Examples: Proposals to alter retirement-account rules, tax incentives for manufacturing or semiconductor domestic supply chains, or changes in corporate tax policy can change corporate cash flow expectations and valuations. When governments signal support for onshore semiconductors or AI infrastructure, it can increase expected future profits for affected sectors.
Net effect: Fiscal policy is typically less immediate than monetary policy but can shift medium-term profitability and capex plans for specific industries.

Market sentiment and breadth

Sentiment — the collective mood of market participants — and breadth metrics determine how healthy a rally is.

Concentration: When a small number of mega-cap stocks drive headline index gains, the rally has narrower breadth. Market-cap-weighted indices can rise while many individual names lag.
Breadth measures: Equal-weighted index performance, the number of advancing vs. declining issues, and the percentage of stocks above key moving averages all help assess whether gains are broad-based.
Recent signal: In late 2025, several measures showed divergence between cap-weighted and equal-weighted returns, indicating leadership concentration among AI and tech-related mega-caps even as many other stocks did not match those gains.

Arguments supporting continued gains

The bullish case — reasons some analysts say "yes" to "are stocks going to keep going up" — typically includes:

Continued earnings momentum: If companies maintain revenue and margin expansion, earnings growth can sustain higher equity prices.
Favorable policy mix: If central banks ease as expected and fiscal policy remains supportive (e.g., incentives for tech manufacturing), the macro backdrop could favor risk assets.
AI-driven productivity and capex: Large, sustained capital spending on AI infrastructure can lift investment-related sectors (semiconductor equipment, data-center real estate, cloud services), creating durable revenue streams and investment cycles.
Historical tendency for positive returns absent recession: Historically, so long as the U.S. avoids a significant recession, equities have tended to deliver positive returns over rolling multi-year windows.
Consensus and institutional outlooks: Many strategists and institutions publish base-case scenarios that include modest additional gains for major indexes in 2026, often assuming mid-single-digit earnings growth combined with stable or slightly higher multiples driven by easing rates and favorable sector rotation.

Note: These bullish scenarios rely on assumptions: the timing and magnitude of Fed cuts, continued AI capex uptake, and no large adverse macro shock.

Key risks and arguments for a reversal or pause

While there are clear upside drivers, there are also plausible downside risks that answer "are stocks going to keep going up" with a cautious or negative view.

Macro / economic risks

Recession risk: An unexpected economic slowdown or recession would likely reduce corporate profits and sharply lower equity multiples.
Labor-market weakening: A deteriorating employment picture reduces consumer demand and can feed into lower revenue and higher credit stress.
Inflation surprises: Sticky inflation could force central banks to keep rates higher for longer, compressing valuations.
Trade and tariff pressures: Rising input costs from tariffs or supply disruptions can squeeze margins.

Policy and market structure risks

Fewer-than-expected Fed cuts or a hawkish pivot: If the Fed signals later or fewer rate cuts, this can push yields higher and hurt equities, especially long-duration growth stocks.
Market concentration and liquidity shocks: Heavy concentration in a few names can create systemic vulnerability if one or several leaders correct sharply.
Shifts in investor positioning: Rapid unwinds of leveraged positions, derivatives hedges or ETF flows can amplify moves and cause liquidity-driven sell-offs.

The "AI disappointment" scenario and sector-specific shocks

Disappointment risk: If AI investment and adoption slow, or if projected productivity gains fail to materialize quickly, the premium priced into many tech and AI-exposed companies could be at risk.
Capex delays: Companies may announce staggered or smaller-than-expected capital outlays if economic conditions sour or if supply-chain constraints appear, which would hurt equipment suppliers and related stocks.

Geopolitical and external shocks

Trade escalation or geopolitical events can disrupt supply chains, raise energy prices, and cause risk-off behavior.
Financial stress abroad that spills into U.S. markets (banking shocks, currency crises) can trigger broad equity declines.

Market indicators to watch (near-term signals)

Investors and analysts monitor several leading indicators to judge if the rally can continue. Key signals include:

S&P 500 earnings revisions and forward guidance: Net upward or downward earnings revisions by analysts and the tone of management guidance in quarterly reports.
Breadth measures: Equal-weighted vs. cap-weighted index returns, advance-decline lines, and percent of stocks above their 50- and 200-day moving averages.
10-year Treasury yield and yield curve: Movements in the 10-year, the two-year, and the two- vs.-ten-year spread (inversion or steepening).
Fed communications and rate-path expectations: FOMC minutes, Fed speeches, and Fed-funds futures.
CPI/PCE inflation readings: Monthly CPI and the Fed’s preferred PCE inflation measure, which inform policy decisions.
Job-market metrics: Payrolls, unemployment rate, jobless claims, and wage growth data.
Corporate guidance and capex announcements: Public statements about investment plans from semiconductors, cloud providers, and hyperscalers.
Market liquidity and volatility: VIX levels, credit spreads, and trading-volume patterns.

Monitoring these indicators together helps form a probabilistic view rather than relying on any single signal.

Analyst and institutional outlooks (consensus and range)

Professional forecasts vary across a range: conservative scenarios assume slower earnings growth and limited multiple expansion; base cases rely on modest earnings gains and some P/E expansion, and bullish cases assume strong AI-led revenue acceleration and several Fed cuts.

Typical assumptions behind forecasts: expected earnings-per-share growth rate for the index, number and timing of Fed cuts in 2026, and projected capex from AI leaders.
Example consensus framing: Many sell-side strategists published 2026 targets in late 2025 that assumed moderate earnings growth and one or two Fed cuts — scenarios that imply mid-single-digit to low-double-digit upside from late-2025 levels under the base case. Bear-case scenarios often rely on earnings downgrades or a hawkish Fed.
Range of outcomes: Analysts publicly lay out bull-bear ranges to reflect the sensitivity of index targets to earnings and multiples. The spread between the bull and bear S&P 500 targets can be wide, reflecting uncertainty in macro and policy trajectories.

Sector and regional outlooks

Technology / AI-related sectors

Leadership role: AI beneficiaries (chipmakers, cloud providers, select software firms) have led the recent rally. These sectors are expected to outperform if AI capex continues and adoption scales.
Vulnerabilities: High valuations and high forward expectations make these names sensitive to any short-term slowdown in orders, revisions to AI timelines, or disappointing margins.

Financials, industrials, healthcare, international markets

Financials: Banks may benefit from normalization in lending and capital markets activity but are sensitive to credit conditions and net-interest-margin dynamics.
Industrials: Industrials and equipment suppliers benefit if global capex cycles continue; they are cyclical and sensitive to global demand.
Healthcare: Often defensive, healthcare can outperform in risk-off scenarios but may lag in rapid risk-on rallies.
International markets: Regions tied to commodity demand or China’s growth cycle will respond to global macro shifts; a U.S. dollar rally or geopolitical tensions can alter relative performance.

Implications for investors and common strategies

This section is informational and not investment advice. Common non-prescriptive approaches investors consider amid uncertainty include:

Diversification: Spread exposure across sectors, styles and regions to reduce single-theme risk.
Rebalancing: Regular rebalancing helps lock in gains from overperformers and buy laggards at lower valuations.
Earnings vs. momentum exposure: Allocate according to conviction—earnings-driven (fundamentals) versus momentum-driven (trend) exposures perform differently in regime shifts.
Defensive allocations: Maintain some allocation to defensive sectors or assets (quality stocks, short-duration bonds, cash) to manage drawdown risk.
Dollar-cost averaging (DCA): Investing regularly over time reduces the risk of poor market timing.
Time horizon and risk tolerance: Align equity exposure with long-term objectives; shorter horizons warrant more conservative allocations.
Use of platform tools: Track broad market indicators and company guidance. Bitget’s market tools and wallet features can help users monitor macro signals and on-chain flows for digital-asset exposures.

Limitations, uncertainty, and probabilistic thinking

Definitive answers to "are stocks going to keep going up" are impossible. Markets are complex adaptive systems influenced by fundamentals, policy decisions, investor positioning and exogenous shocks. Good practice is scenario analysis:

Build multiple scenarios (base, bull, bear) with clear assumptions for earnings growth, interest rates and sector capex.
Assign probabilities and update them as data arrives (earnings beats/misses, Fed messaging, breadth changes).
Avoid overconfidence in any single forecast; use leading indicators to recalibrate views.

Frequently asked questions

Q: Does a 3-year rally mean a crash is coming? A: Not necessarily. Rallies can last several years, especially if supported by earnings growth. However, longer rallies can raise the probability of corrections; monitor breadth, valuations and macro indicators.

Q: Should I sell if stocks are at highs? A: Decisions should depend on your goals, time horizon and risk tolerance. Highs alone are not necessarily a sell signal; consider rebalancing and risk management instead of blanket selling.

Q: What is market breadth and why does it matter? A: Breadth measures how many individual stocks participate in a market move. Strong breadth implies a healthier, more sustainable rally; narrow breadth (few leaders driving gains) increases fragility.

References

Reuters and Bloomberg reporting on TSMC Q4 results and 2026 capex plans (reported January 2026).
MarketWatch and Reuters coverage of retirement-account proposals and policy commentary (dates in early 2026 reporting cycle).
Barclays strategist note on single-stock volatility and market concentration (reported in late 2025).
Public earnings releases and company guidance from major banks and chip companies reported in late 2025 and early 2026.

(Readers can consult these institutions’ published reports and mainstream business outlets for original filings, press releases and transcripts.)

Practical next steps and how to monitor the market

Track weekly earnings revisions for the S&P 500.
Watch equal-weighted vs. cap-weighted returns and the percentage of stocks trading above key moving averages.
Monitor 10-year and 2-year Treasury yields and the Fed funds futures curve.
Read Fed minutes and major central banker speeches for policy tone.
Follow large-cap tech and chipmaker capex announcements for AI cycle confirmation.

Explore Bitget tools for monitoring market data, watchlists and wallet features to track positions and broader liquidity flows.

Further explore Bitget’s market analysis tools and the Bitget Wallet to keep informed on trends and to manage exposures as you apply scenario-based decision-making.

More practical suggestions and platform tools are available on Bitget’s learning resources—start tracking the indicators above and revisit your scenarios as the data evolves.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.