Despite ongoing concerns like tariff tensions and valuation worries, the S&P 500 remains within striking distance of its previous highs. While headlines often focus on short-term uncertainty, several underlying factors are quietly bolstering the current bull market and could strengthen its momentum in the months ahead.

According to recent market analysis, five major indicators are emerging as potential long-term supports: the Federal Funds Rate, 10-year Treasury yields, the U.S. inflation rate (CPI), growth in the M2 money supply, and consumer confidence. Historical data shows that when these elements align positively, the S&P 500 tends to deliver significantly higher returns.

For instance, during periods of rising M2 money supply, the S&P 500 has historically seen an average annualized return of 12.7%, compared to just 2.2% during periods of slower money growth. Similarly, when interest rates are cut rather than raised, the market has performed better on average. Lower bond yields, easing inflation, and growing consumer sentiment have each shown individual positive effects as well.

What makes this more compelling is the combined effect. When all five of these factors are trending favorably at the same time, historical returns in the S&P 500 have averaged a robust 16.3% annually since 1960.

At present, the market setup seems increasingly aligned with these supports. While the bull market began under tight monetary policy and limited money supply growth—something that typically hinders upward momentum—recent trends suggest conditions may shift. Inflation has already dropped sharply from its 2022 highs, and consumer confidence is starting to rebound from deep lows. The Federal Reserve may also pivot from restrictive to more accommodative policy, and bond yields could begin a downward trend. If these trends continue, investors may see broader tailwinds reinforcing the equity rally.

Although some believe this bull market is aging and overpriced, the underlying structural supports suggest otherwise. As long as these foundational elements remain intact—or even improve—it may be premature to bet against the rally.

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