Four signals point to an extended bull market, says Wells Fargo Wealth & Investment Management CIO

Investors must distinguish between the "signal" of fundamental long-term trends and the "noise" of daily market volatility, according to the president of the Wells Fargo Investment Institute and chief investment officer of Wells Fargo Wealth & Investment Management.

In his September market report, Darrell L. Cronk asserts that by rising above the daily clamor of Federal Reserve pressure, geopolitical shifts, and innovation swings, secular trends can be seen that have the potential to extend the current bull market through 2026 and beyond.

The investment strategist identifies four core signals that warrant investors' attention:

1. Fiscal Clarity Above Trade Noise
   Despite political divisions, substantial, unallocated investments from two different presidential administrations continue to drive long-term growth opportunities. New legislation, such as the One Big Beautiful Bill Act, provides crucial fiscal clarity and benefits including tax cuts for companies and consumers, that are expected to boost corporate margins and earnings. Complementing this is a trend toward deregulation in sectors like Energy, Financials, and Health Care, which could materially relieve corporate expenses.
2. AI Revolution Above Spending Noise
   The emergence of AI is described as a "monumental period of transformation" that is uniquely "larger, moving faster, and more compressed" than past shifts. The massive infrastructure spending to support this cycle is driving a new capex super-cycle, with estimates for AI infrastructure spend nearing $7 trillion by 2030. This spending extends horizontally across nearly every industry, even transforming the historically defensive Utilities sector into a growth sector, with its market capitalization projected to double in the next decade due to rising energy demand.
3. Monetary Policy Direction Clarity Above Fed Noise
   The signal is one of monetary policy stimulus proceeding without an economic recession. The Fed's own dot-plot projects rate cuts totaling 100 basis points between this year and next. Historically, when rate cuts occur without the classic preconditions for a recession (like a commodity shock or an asset bubble), markets have performed very well. Currently, the Financials sector of the S&P 500 is at an all-time high, and credit spreads show "no warning signs," suggesting the economy is not "close to hitting a wall".
4. Market Breadth Expansion Above Concentration Noise
   While recent advances have been narrow, market strength is now broadening into sectors beyond technology. When the S&P 500 Index is viewed on an equal-weighted basis, it suggests that most large-cap stocks today are "reasonably priced". Further optimism is supported by record money market balances (around $7 trillion), a portion of which is expected to find its way into equities and other assets as short-term rates fall. This is coupled with robust M&A activity, which is up over 30% year-over-year in 2025 and has historically been a positive indicator for equity markets.

Cronk concludes that the simultaneous alignment of so many favorable conditions, including falling interest rates, a massive technology revolution, and an early, strong capex cycle, is rare and has historically led to a good environment for markets. Investors must keep their "eyes focused on the horizon".