In 30 seconds: The S&P 500 bull market celebrates its fourth anniversary with analysts noting earnings-driven gains, historically long streaks without major drawdowns, and historical precedent suggesting continued strength into year five. US housing market data shows record-high cancellation rates, a historic gap between sellers and buyers, lowest pending home sales since COVID lockdowns, and rising inventory, while home prices in real (gold-adjusted) terms have collapsed despite nominal gains. Saudi Arabia is expanding its East-West pipeline to bypass the Strait of Hormuz as Middle East crude flows recover to 80-90% of pre-war levels, though refined product flows remain severely disrupted, while forward WTI prices climb to two-year highs. At the NABE 2026 conference, economists and Fed officials discussed persistent inflation, the 'vibecession' driven by cumulative price increases and labor market stagnation, and the importance of central bank transparency in communicating policy reaction functions.
The bull market turns four today, and the S&P 500 has returned 131% over the past four years. Happy birthday. S&P 500: 7,807.24. The Russell 2000 had a slightly worse session, settling at 2,794.48, off 0.45%. This is the 8th longest bull market since WWII, and the last time one failed to reach its fifth birthday you have to go back to the 1960s. The two bull markets up more on their 4th birthday — the 1980s and 2010s — saw huge gains in year five. The S&P 500 has gone 51 trading days without falling more than 1%, and it has been 1,000 trading days since the index last made a new 52-week low — the 6th longest such streak in history. The post-midterm pattern holds too: the index has finished higher a year after midterm elections the past 19 times. What makes this rally palatable, if you are the sort of person who needs rallies to be palatable, is that multiple expansion isn't the reason for the gains and you could argue this isn't an overvalued market at all. S&P 500 total return: 131%. Profitable Russell 2000 stocks continue to outperform non-profitable ones, a reversal from last year when unprofitable names beat profitable ones 2-to-1. Quality winning is the kind of thing that makes a bull market feel earned rather than borrowed. Not everything is serene. Lower rated Caa high yield spreads have been soaring, though the widening hasn't yet spread to the rest of high yield, where spreads remain quite contained. If this is the first domino, it hasn't knocked down anything else. Small caps were outperforming large caps by more than 13% earlier this year, now they are lagging. On the day of the bear market low in October 2022, the Wall Street Journal had no market- or economic-related story on the cover. Nobody rang a bell. They never do.
The US housing market is doing that thing where both sides of a trade stare at each other across a widening chasm and nobody blinks. Home purchase cancellations hit 14% last month, a record for September. When one in seven deals falls apart before closing, you do not have a functioning market. You have a standoff. The numbers bear this out structurally. The gap between sellers and buyers has swollen to 560,000 people, the widest on record going back to 2013. Sellers outnumber buyers by 58%. Inventory has climbed to 1.16 million homes, the highest level since 2019. So there are plenty of houses available. The affordability math is straightforward and brutal. Mortgage rates have tripled from their reference discount lows. Nominal single family home prices are up 33% over the recent cycle. April 2020 was a month where much of the US economy was shut down. Here is the longer view that should concern anyone treating their home as a retirement plan. Since 2002, US single family home prices in dollar terms are up 180%. Priced in gold, now at $4,193.70 per ounce, those same homes are down 81%. The nominal gain is real in the sense that your bank will accept the dollars. It is less real in the sense that those dollars buy considerably less of almost everything else.
Saudi Arabia has announced plans to expand its East-West pipeline, the infrastructure backbone designed for bypassing the Strait of Hormuz. The US Secretary of Energy says Middle East (ex-Iran) crude flows are back to 80%-90% of pre-war levels. That sounds encouraging until you look at refined products. Persian Gulf refined products flows are running at just 25%-30% of pre-war levels. You could also describe a car with three functioning tires as viable. Meanwhile the forward curve is quietly repricing risk. Twelve-month forward WTI futures have averaged $78 per barrel so far in October, their highest average level in more than two years. US forward prices are climbing gradually and sending a slightly stronger signal to increase production. The signal is not a scream; it is a polite suggestion that producers might want to drill a few more wells.
Two panels converged on a diagnosis. One framed the malaise around five drivers: Cumulative inflation, Miserable expectations, Strange and uneven labor market, Profits for thee not for me, Net worth in driver's seat. A second, overlapping list added Later achievement of life milestones, Media and social negative bias, Labor market frozen and slow wage growth, Price volatility and cumulative inflation. Cumulative inflation appears on both lists. Inflation can slow and still leave you poorer than you were. 43% of workers continuously employed at the same firm over the four years spanning 2021-2024 experienced a real wage decline, with a mean loss of roughly 9% among those who fell behind. If you kept your job, stayed loyal, and still lost purchasing power, your mood about the economy is not irrational. It is arithmetic. The mechanism is reflexive: When people expect higher prices, they make decisions with this in mind. It can become a self-fulfilling prophecy that makes it harder for monetary policy to bring inflation back down. Explaining my reaction function is not a prediction for policy. It's describing how I expect policy to adjust as conditions change. Separately, the latest Outlook Survey flagged increased inflationary pressures from the Middle East conflict, some passthrough to core inflation and a more restrictive Fed stance.
Here is what your weekly spend looks like right now.
Gas (per gallon): $4.35, down 2.49% on the week
Groceries (CPI food at home): 347.10, up 0.12% on the month
Eating out (CPI food away from home): 350.31, up 0.12% on the month
Average hourly earnings: $37.81, up 0.13% on the month