The Bull Market Acceleration has Begun
A useful way to interpret the current market cycle is to treat 2025 not as a late-cycle environment, but as a mid-cycle repositioning phase analogous to 1926 within the 1920s bull market.
When the post-pandemic recovery beginning in 2020 is aligned with the post-pandemic expansion that began in 1921, both cycles exhibit a similar structural progression: an initial surge driven by policy stimulus and technological adoption, followed by a period of uneven market behavior in which indices continue rising but leadership rotates and participation fluctuates.
This interpretation reframes the apparent instability of the past year as a normal consolidation phase within a longer expansion rather than evidence of a market top. The present environment reflects the transition into the acceleration phase.
Historical Evidence: The 1926 Testing Phase
Historical index behavior supports this interpretation. During 1926, the Dow Jones Industrial Average recorded several new highs early in the year but spent much of the middle period below its February peak before recovering later.
The broader market composite similarly reached multiple highs but experienced a pronounced mid-year softness in both price and participation. The pattern was neither euphoric nor bearish; it reflected a market sorting winners and losers following the initial enthusiasm of the post-pandemic expansion. The year functioned as a structural testing phase rather than a reversal.
Modern Market Behavior Through the Same Lens
The modern market behavior observed through 2025 fits this pattern closely. Major indices continued to print record closes, yet beneath the surface leadership rotated repeatedly between mega-cap technology, cyclicals, mid-caps, and smaller capitalization stocks. Periods of narrow leadership were followed by bursts of broader participation.
The overall trajectory remained upward, but the path was irregular and internally competitive. In both the historical and modern cases, the defining feature is not directional weakness but allocation reshuffling.
Breadth as the True Signal of Transition
Breadth data reinforce this interpretation and provide a clearer distinction between repositioning phases and true acceleration phases. Industry-level analysis from the Cowles Commission indices shows that in 1926 only a minority of sectors were simultaneously achieving new highs in any given month. Participation was episodic and uneven, with several months showing almost no industries reaching new peaks.
In contrast, 1927 displayed a sharp expansion in participation, with roughly one-third to one-half of industries reaching all-time highs concurrently during the strongest months. This transition marked the shift from testing conditions to confirmation conditions, where the market advance became both broader and more persistent.
Modern breadth indicators suggest a comparable transition may now be underway. While 2025 exhibited oscillating participation despite frequent index highs, early 2026 shows evidence of wider sector involvement, record highs appearing across historically lagging segments, and increasing synchronization among different market capitalizations. The pattern is consistent with the historical shift from 1926’s probing environment into the broader advance observed in 1927.
The Acceleration Phase Has Begun
If this analogy holds, the implication is that 2026 corresponds structurally to 1927, the period in which the bull market stopped behaving as a tentative recovery and began exhibiting sustained upward momentum.
Historical records show the Dow posting a sequence of new monthly highs across much of that year while industry participation simultaneously expanded. The defining feature of that period was not simply price appreciation but the disappearance of cyclical hesitation; markets transitioned from debating whether growth would persist to pricing in the continuation of the new economic regime.
Structural Forces Supporting the Current Expansion
Two structural differences suggest that the current cycle has even stronger acceleration potential than the 1920s example.
First, the modern productivity shock has broader horizontal reach. The technological transformation of the 1920s centered on electrification, mass production, and early communications technologies. The current transformation includes artificial intelligence, automation, cloud-based infrastructure, advanced materials, robotics, and biotechnology. Unlike prior technological waves that affected discrete industries sequentially, these systems function as cross-industry productivity multipliers capable of simultaneously lowering costs and increasing output across large segments of the economy.
Second, the structure of capital formation has changed materially. The 1920s operated within an analog financial system with slower capital transmission and limited participation channels. Modern markets operate with instantaneous global capital mobility, expanding asset securitization, and growing tokenization mechanisms that allow fractional ownership and more fluid distribution of financial exposure. These mechanisms lower friction in asset transfer, increase liquidity, and broaden participation, accelerating how technological productivity gains translate into market valuations.
The Investment Implication
Taken together, the historical comparison and current breadth expansion indicate that markets have already moved beyond the repositioning phase and into the third leg of the expansion. In prior cycles, this stage has historically been the period of the most persistent advance, the broadest participation, and the strongest trend confirmation.
As in our prior calls to action, the conclusion is straightforward: the third leg of what we view as the greatest bull market is happening now. The acceleration phase is historically the least risky phase of the cycle because structural adoption is already underway and participation broadens rather than narrows. Investors should be bold. The environment favors aggressive positioning into the expansion rather than defensive hesitation.
