Han Dieperink: The bull market is only halfway through
This column was originally written in Dutch. This is an English translation.
By Han Dieperink, written in a personal capacity
Since the autumn of 2022, I have been sticking to the ‘über-Goldilocks’ scenario: an economic and stock market environment that is almost too perfect. Not too hot, not too cold, but just right – and then a little bit more on top of that.
Now, in mid-May 2026, we can see that this is no longer just wishful thinking. The US stock market, as measured by the S&P 500, has risen by more than 100% since its low in mid-October 2022. A doubling in less than four years. Anyone who opens the history books knows that bull markets that have reached this milestone rarely stop straight away. In fact, the statistics suggest that a further doubling could be on the cards from this level. Even after the impressive rise of the past six weeks, this base scenario remains intact. The ingredients for a continuation are still very much in place. Yet it is time to take another look at the ‘über-Goldilocks’ story.
We are familiar with the concept of Goldilocks from the 1990s: an economy that neither overheats nor experiences a recession, with stable growth and low inflation. ‘Über-Goldilocks’ goes further. It encompasses not only successful disinflation without a recession – a historically rare achievement by central bankers – but also the most radical productivity revolution since the Roaring Twenties. Back then, human muscle power was automated. Now we are automating human brainpower with artificial intelligence. That is a far more fundamental and sustainable phenomenon.
1) Moderate but robust growth
The economy is growing strongly enough to support profits, but not so fast as to risk overheating. Companies are investing too little rather than too much. Productivity gains are already exceeding those of the late 20th century, and we are still only at the very beginning of the AI transformation. This leads to a unique win-win: wages can rise whilst labour costs for companies fall. Employees benefit as consumers, as shareholders and as owners. Moreover, people are increasingly receiving part of their remuneration in capital, which contributes to a K-shaped economy in which the skilled and the wealthy are progressing particularly rapidly.
2) Low and stable inflation
Disinflation since the post-COVID peak has been remarkably successful. Inflation below 2% is within reach, even as oil prices have recently been higher. Paradoxically, the best remedy for high oil prices is a high oil price: it stimulates supply and accelerates the energy transition. The likelihood is growing that we have experienced the last real oil crisis and that prices will come under structural pressure due to the energy transition. That is excellent news for purchasing power and for companies’ profit margins.
3) Accommodative monetary policy
The Fed and other central banks need neither to raise rates aggressively nor to cut them in a panic. Stable or gradually falling interest rates are the ideal scenario for risky assets. Liquidity remains ample. Recent geopolitical tensions surrounding Iran may have delayed rate cuts, but delayed is not cancelled. As long as the market can hope for lower interest rates, there remains upside potential. What’s in the barrel doesn’t go sour.
4) Healthy labour market
There is full employment without wage growth threatening profit margins. Despite automation, demand for labour continues to grow. History shows that technological revolutions ultimately create more jobs than they destroy. The labour market supports consumption without throwing the economy off balance: precisely the sweet spot.
5) Spectacular earnings growth
The first quarter of 2026 was nothing short of impressive. Nearly 85% of S&P 500 companies beat expectations, with earnings per share growth of nearly 28% against an expected 13%. More importantly, this strength is no longer limited to the United States. In Europe, over 47% of companies outperformed expectations, and in Japan, earnings are also above consensus.
The breadth is healthy. It is not just the Magnificent Seven driving the market, but also consumer companies in the higher segment. However, we are seeing signs of a divide: Kraft Heinz, Whirlpool and McDonald’s point to pressure on lower income groups. Just 10% of consumers account for 50% of consumption. This polarisation remains a point of concern, but is not undermining overall profit growth for the time being.
6) Geopolitical shocks as fuel
Unlike in the 1990s, there are numerous external shocks this time around. Wars, tensions, energy crises. Yet markets often ignore these as soon as it becomes clear they have little impact on corporate profits. The correlation between profits and share prices stands at 98% historically. Everything else is noise. Moreover, conflicts drive innovation and investment, which is ultimately positive for equities.
7) No euphoria
This is perhaps the healthiest characteristic. Investors are optimistic enough to take risks, but there is no sign of extreme positioning or irrational exuberance. Scepticism surrounding artificial intelligence remains strikingly high, despite growing evidence of its impact. That caution, which began as early as 2022 with widespread recession fears that failed to materialise, keeps the market in balance and prevents excesses.
The recent six-week rally is spectacular, but fits the pattern of bull markets: strong recovery rallies often follow corrections. The über-Goldilocks scenario is, by definition, temporary. Eventually, one of the ingredients will fall out of balance. But at the moment, all seven components are still present and reinforcing one another.
Anyone who thinks the bull market is over after prices have doubled is forgetting the lessons of history. Bull markets do not end because they have risen ‘too far’, but because the underlying narrative changes. That narrative of a productivity revolution, controlled inflation, profit growth and liquidity appears to remain intact for the time being. Prices could well double again. Despite everything, the market is far from finished.