Bull market trends: Insights from Jurrien Timmer - September 29, 2025
Fidelity’s Director of Global Macro Jurrien Timmer, shared his insights on the current powerful cyclical bull market nested within a broader secular uptrend.
Here are some of the key points from his commentary.
Bull market momentum and global growth drivers
Jurrien noted that we are currently in a cyclical bull market within a secular bull market, which could potentially offer opportunities for generating returns. This market cycle began in October 2022 and has seen accelerating earnings estimates since then. Monetary policy is becoming more accommodative globally, including recent rate cuts by the Federal Reserve. Positive economic momentum is supported by a strong global economy and advancing global money supply, with anecdotal indicators such as increased travel activity suggesting this strength.
Valuation nuances amid earnings acceleration
Despite strong earnings growth, valuations remain elevated particularly in the U.S. market. The S&P 500 trades at about 25 times earnings and 3.2 times sales, with the MAG7 stocks, comprising 35% of the index, trading at a 35 P/E ratio. This concentration creates valuation disparities and potential risks if earnings or sentiment falter. Earnings estimates have rebounded from earlier tariff-related setbacks supported by the AI investment boom and the "One Big Beautiful Bill." Analysts anticipate a growth of around 7% in the upcoming earnings season. Historically, earnings have shown resilience after initial declines, and market participants often consider these expectations in their pricing strategies.
Global diversification: unlocking value beyond the U.S.
Non-U.S. developed markets trade at lower valuations, around 16 times earnings compared to the U.S., making them more competitive. European and Japanese firms are increasingly returning value to shareholders through dividends and buybacks, reflecting a cultural shift towards buybacks in these markets. This environment supports a diversified approach, balancing exposure between richly valued U.S. mega-cap growth stocks and more reasonably priced international markets. This strategy helps to mitigate concentration risk and access undervalued opportunities.
Central bank policy and economic uncertainties
The Federal Reserve’s recent 25 basis point rate cut signals a shift toward a more accommodative stance amid economic uncertainties including the possibility of a U.S. government shutdown and debt ceiling negotiations. A shutdown may potentially delay economic data releases, which could have some impact on the economy. Historically, shutdowns have not caused systemic disruptions. Discussions around the Fed’s neutral rate (R-Star) suggest it is lower than traditional estimates, indicating that monetary accommodation may persist longer.
AI innovation and market sentiment dynamics
The AI boom is influencing market sentiment and investment flows, with growth stocks and IPOs linked to AI technologies attracting renewed interest. This expansion of leadership beyond the established MAG7 stocks reflects evolving market dynamics. The market's enthusiasm draws parallels to past market trends, such as the late 90s, and the potential for a melt-up scenario. While this trend offers growth opportunities, maintaining valuation discipline is important to manage risks. Market sentiment surveys and activity data can provide useful signals for timing and allocation decisions.
Conclusion: strategic diversification for sustainable growth
The current market environment is characterised by a cyclical bull market within a secular bull market, presenting opportunities amid technological innovation and global growth. While valuation challenges persist, particularly in the U.S. market with its concentration in mega-cap stocks, global diversification can potentially offer lower valuations and increasing shareholder returns. As central bank policies evolve and AI continues to drive market dynamics, the landscape remains complex yet promising.
