Inside the forces shaping equity markets: Insights from Jurrien Timmer - June 1, 2026

A long-term cycle that began in 2009

Secular bull markets are long-duration cycles that typically span many years and are associated with above-average returns. In his view, the current cycle began in 2009 following the global financial crisis. These cycles are relatively rare and tend to follow major economic resets. Historical examples include the post-war expansion in the 1950s and the disinflationary period beginning in the early 1980s. Within this broader trend, shorter-term advances have also been strong. The current cyclical bull phase has delivered a gain of about 118 percent over roughly 45 months, a result that is comparable to prior periods such as the late 1990s.

The fundamentals behind market strength

Three core drivers continue to support the market:

1.      Earnings growth is running at approximately 20 percent

2.      Profit margins are in the mid-teens, up from much lower levels in 2009

3.      Credit spreads remain tight

Jurrien highlighted these factors as the foundation of current market conditions. Strong earnings growth in particular has helped support equity prices while limiting the need for higher valuation multiples. Another defining feature is concentration. The largest companies now represent a significant portion of the market, with the top cohort accounting for roughly 60 percent of overall capitalization.

Valuations supported, but sensitive to rates

Valuations are elevated but remain largely supported by fundamentals. Current price levels can be explained by margins and credit spreads, unlike past periods such as the tech bubble when valuations diverged from underlying drivers. However, interest rates remain an important variable. When bond yields become more competitive with equity returns, they can influence valuation levels. Jurrien noted that once yields converge, it matters a lot for how markets are priced. This relationship suggests that changes in the bond market could play a more significant role in shaping equity valuations.

Supply dynamics and the role of buybacks

Market strength has also been supported by supply and demand dynamics. Since 2009, companies have retired significantly more shares through buybacks and mergers than have been created through new issuance. He cited roughly $3.5 trillion in new supply compared to about $30 trillion in share reduction. This imbalance has supported returns over time. There are, however, signs this trend may be shifting at the margin. Companies are directing more cash toward capital spending, which reduces the amount available for buybacks. Upcoming IPO activity may also increase supply, though the actual number of shares entering the market is expected to be smaller than total company valuations might suggest.

Inflation signals and a mixed backdrop

Inflation remains a key consideration. Jurrien pointed to a divergence between rising commodity prices and relatively stable inflation expectations in the bond market, noting that one of these two is going to be wrong. At the same time, inflation continues to be felt in areas such as food and energy. These components are often excluded from core measures, yet they remain meaningful for households and broader economic conditions. An additional complexity is that both commodities and equities appear to be in upward trends. Historically, these asset classes have often moved in opposite directions, making the current environment less typical.

Two forces shaping the outlook

Looking ahead, the market appears to be influenced by two competing forces. On one side is continued earnings strength, supported by margin expansion and productivity improvements. Advances in areas such as AI are contributing to those trends and may support further efficiencies. On the other side is inflation and interest rates. Higher inflation could lead to tighter policy and place pressure on valuation levels. These forces may operate at the same time, creating a more complex market backdrop.

How cycles tend to end

Historically, secular bull markets have tended to end in one of two ways. Valuations may rise to levels that are no longer supported by fundamentals, or inflation and rising rates may gradually reduce valuation multiples even as earnings remain stable. Both outcomes have precedent in prior cycles.

Watching key indicators

Several indicators may provide insight into how conditions evolve. Employment data, wage trends and inflation remain important signals. Jurrien noted that strength in jobs and wages is being watched closely, particularly in the context of inflation pressures.

Conclusion: A complex but still constructive environment