Good morning, investors. Pessimists have sounded the alarm all year about AI, though the market has shrugged it off and marched higher anyway.

A new analysis from our friends at Fundstrat suggest the bears may have to swallow their words for at least another year.

Today’s column is a guest post from Hardika Singh, an economic strategist at Fundstrat Global Advisors, an investment research firm.

Bears on Wall Street believe that after three straight years of monster gains for stocks, the AI-driven party can’t extend another year. 

History suggests they’d be wrong. 

Since 1928, there have been 12 instances of three back-to-back annual advances of at least 20% in global equity markets.

In five of those 12 instances, indexes saw gains accelerate in the fourth year, according to a new analysis by Fundstrat’s data team.  

The average gain in the fourth year was 12%.

If history was a guide, then the odds would be in favor of 2026 actually being better than 2025’s 16% gain for the S&P 500. 

In the past three years, the index has gained 76%. But the historical median gain notched by equity indexes over that same duration is 155%, so there’s more room for the rally to run. 

This year alone, some say that stocks could cap a third straight year of above 20% gains with the Santa Claus rally around the corner and strong December seasonality.

If that happens, it’d be the first time since 1998, driven largely by:

Still, the bears haven’t given up. They instead argue that AI is a bubble.

Last week’s market reactions to earnings from Oracle and Broadcom served as ammunition to the non-believers, signaling that it’s no longer enough to just spend billions on AI without a clear path to monetization. 

Elevated valuations have made matters worse. 

Many indicators as of late have either hit levels higher than what was seen during the dot-com bubble — such as forward price-to-sales ratio — or right below those levels, like forward price-to-earnings and the Shiller P/E ratio.

But higher valuations alone aren’t necessarily a red flag, as the bull market of the past three years has shown. 

The data show that in nine out of 12 instances where stocks advanced three years in a row, the average trailing price-to-earnings ratio before the rallies ensued was at multiples of 23.

Currently, companies in the S&P 500 are trading at multiples of 26, which isn’t all that much higher.

Hardika Singh is an economic strategist at Fundstrat Global Advisors, an investment research firm. Follow her on LinkedIn and read her disclosures here.

Your home equity should work as hard as the rest of your portfolio.

That’s why homeowners are turning to Horizon.

Horizon allows you to convert idle home equity into bitcoin, diversifying wealth into the best-performing macro asset of the decade.

Why smart investors use Horizon:

See your home’s bitcoin potential in 2 minutes.

🏦 President Trump says Kevin Warsh is top of his Fed list. That pushed back on previous odds for Kevin Hassett as the next Fed Chair, though both remain frontrunners. (CNBC)

📊The global rate-cut cycle is ending. Monetary easing across developed economies were meant to catalyze a boom in 2025, though much of that momentum has started to fizzle or pause. The data imply that hawkish policymakers have the upper hand as the new year begins. (Bloomberg)

🏘 It’s the end of an era at Berkshire Hathaway. With Warren Buffett retiring at the end of 2025, the company intends to move toward a more conventional structure, Geico CEO Todd Combs is leaving to JPMorgan, and Greg Abel will take over as head of the conglomerate. (CNBC)

🗓 December 15, 1886: The New York Stock Exchange’s daily share volume exceeded 1 million shares for the first time ever, roughly eight years after telephones were installed on the trading floor.

📩 Want to get in front of 192,000+ investors who get this newsletter and the 350,000 professionals who can access it on Bloomberg Terminals? Reply to this email and tell us why we should work together.

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter and host our show, Full Signal, to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].