"A Historic Opportunity": Analysts Have Spotted a Hidden "Bearish" Trend in the S&P 500

The S&P 500 Index is trading just 2% below its all-time high, but analysts at the research firm The Kobeissi Letter believe the market is simultaneously experiencing a “hidden bear trend,” which represents “one of the most significant opportunities” today. According to the research firm, 84% of the stocks in the S&P 500 are currently trading at least 10% below their all-time highs. This situation creates what the researchers at The Kobeissi Letter call the historical paradox of a “bull-bear” market.

The macroeconomic backdrop has changed dramatically compared to the start of the year, when the Fed was expected to cut rates at least three times in 2026—by a total of 75 basis points. This was a key element of the “bullish” case for stocks: investors were counting on cheaper capital, rising investment, and record capital expenditures by tech companies, analysts note. However, as of today, the Fed has already raised interest rates once this year, and markets are pricing in three more hikes by June 2027. In total, including the September hike, such moves by the Fed could lead to a 100-basis-point increase in the Fed’s benchmark rate. This marks a shift in expectations toward a 175-basis-point rate hike, Kobeissi noted, emphasizing that the S&P 500, nevertheless, is still trading near record highs.

Researchers cite a “historic spike in oil prices” as the reason for the reversal in macroeconomic expectations: diesel fuel has risen in price by more than 80% compared to its January 2026 low, and Brent crude is trading around $106 per barrel. In addition, the cost of borrowing has risen sharply due to inflation, the Fed’s tightening of monetary policy, and the U.S. budget deficit, which is approaching $2 trillion.

According to the company, most S&P 500 components are trading well below their all-time highs: 84% of the stocks in the S&P 500 are currently trading at least 10% below their all-time highs. The real estate sector leads in terms of the depth of the decline: 97% of stocks have fallen by at least 10%. It is followed by the materials sector (96%), utilities (94%), and consumer cyclicals (92%). Furthermore, 59% of S&P 500 stocks have fallen by at least 20% from their peak values, 41% are down by more than 30%, and 17% have plummeted by more than 50%, according to data from Kobeissi.

At the same time, just 10 stocks accounted for 70% of the S&P 500’s gains since March 30. These stocks contributed 16 percentage points to the index’s 23% gain over that period. Nvidia made the largest contribution, accounting for 13% of the S&P 500’s gain, or 3 percentage points. It was followed by Micron, Apple, and Microsoft, each of which contributed 9% to the S&P 500’s rise, adding 2 percentage points each. AMD and Google’s parent company, Alphabet, contributed 8% and 7%, respectively, to the index’s performance.

Meanwhile, the remaining 490 stocks accounted for only 30% of the S&P 500’s gain since March 30, contributing 7 percentage points.

“The reality is that most of the components of the S&P 500 are effectively in a ‘bear market.’ In our view, this is actually positive for the S&P 500—or, at the very least, it doesn’t matter for now,” the analysts wrote.

Without the war in the Middle East and its consequences—namely, high fuel prices—the S&P 500 index could have exceeded 9,000 points, according to Kobeissi.

"This is perhaps the most resilient market in history. If the S&P 500 is just 2% away from its all-time high despite inflation nearing 4%, rising fuel prices, and Fed rate hikes, just imagine where the index would be if the war with Iran had ended, oil prices had fallen, and monetary easing had resumed. Or if this conflict had never started in the first place,” the analysts noted.

In the second quarter of 2026, consolidated earnings growth for S&P 500 companies stood at 52%, according to Kobeissi. This is the highest growth rate since the second quarter of 2021—a period when the global economy was emerging from an unprecedented lockdown and the U.S. government had allocated $4 trillion in stimulus measures.

Furthermore, artificial intelligence is having a greater impact on the markets than it appears: the surge in corporate earnings is driving the trend amid record inflation, which has exceeded the Fed’s 2% target for 67 consecutive months, the researchers noted. The company also pointed out that the S&P 500 index and the S&P 500 technology sector currently have nearly identical forward P/E ratios. Historically, technology stocks have almost always traded at a premium to the broad S&P 500 index, analysts explained.

“In our view, the stocks of the companies driving the stock market higher—especially large-cap tech giants—already reflect significant discounts, despite the fact that they are trading at or near all-time highs. We are convinced that these stocks would be worth MUCH more if it weren’t for the macroeconomic factors of the past seven months,” Kobeissi noted.

The company believes that even the slightest broadening of the market (the extent to which many stocks are participating in the rally) will cause buying demand to surge. But even without such a turnaround, the stocks of large technology companies—which drive the main trading dynamics—appear relatively “cheap” compared to the S&P 500 as a whole, according to researchers.

“Even though the S&P 500 is entering its fifth year of a ‘bull’ market, we are convinced that stocks are currently trading at a significant discount. This has manifested as a ‘hidden’ bear market, holding back the valuations of the world’s largest and fastest-growing companies,” Kobeissi concluded. Analysts believe this represents one of the most significant “historical opportunities” in today’s market.

On October 16, the editorial team at MarketWatch drew attention to a similar trend: It analyzed 191 stocks from the S&P 500 that, despite the continued rise of the broad U.S. stock index, are currently in “bear territory” (having fallen by at least 20% from their 52-week highs). From this group, MarketWatch selected 10 stocks of companies that, first, are expected to demonstrate, in the calendar years 2026–2028, average annual revenue growth three times higher than that of S&P 500 companies as a whole. Second, at least 80% of analysts surveyed by FactSet recommend buying these stocks. The stocks in question are: Oracle, Micron Technology, Seagate Technology, Axon Enterprise, Coherent, SanDisk, Broadcom, Applied Materials, Marvell, and Lumentum.

This article was AI-translated and verified by a human editor