What Happened to the Bubble? Investor Fears Popped Instead.

Workers paint an eagle statue on the Federal Reserve Building in Washington. (Kevin Dietsch/Getty Images)

It’s almost the most wonderful time of the year. Loved ones are gathering. Temperatures are dropping. And stocks are climbing—and we don’t even have to be thankful for AI.

Before this week, the S&P 500 index had been having its worst November since 2008 as markets soured on the artificial-intelligence trade. Bubble talk has proliferated amid mixed earnings, huge and growing budgets, and a seemingly closed loop of spending.

Investors are still feeling cautious about tech, but a broadening of the rally meant that indexes could still make progress. The Dow Jones Industrial Average has gained 2.6% this week, while the S&P 500 has risen 3.2%, putting them on pace for their best Thanksgiving week since 2012. The Nasdaq Composite, up 4.2%, is on pace for its best one since 2008.

“It bodes well for markets and investor sentiment when Nvidia can drop as much as 7% from [Monday’s close] to the morning lows on [Tuesday] and this tape and Tech sector do not materially nose dive,” writes Mizuho Securities Managing Director Jordan Klein. “[It] tells me investors or passives want to own the market, maybe just a bit less Tech and Nvidia, but rather some other sectors and thematics.”

Some of that could simply be a festive mood in a holiday-shortened week. Yet it also reflects ongoing bullishness about the year ahead, as more firms release their rosy 2026 forecasts, which often call for another round of double-digit gains for the S&P 500, thanks partially—but not entirely—to AI. J.P. Morgan strategist Dubravko Lakos-Bujas, for one, outlined a path for the S&P 500 to end 2026 at 7500.

“We are positive on global equities, expecting double-digit gains across developed and emerging markets supported by robust earnings growth, lower rates, and declining policy headwinds,” he writes. “The U.S. is set to remain the world’s growth engine, driven by a resilient economy and an AI-driven supercycle that is fueling record capex and rapid earnings expansion.”

In addition, the September producer price index—released belatedly on Tuesday after the government reopened—showed inflation roughly in line with expectations. That’s good news for investors banking on coming interest rate cuts, as odds of a quarter-percentage-point cut at December’s meeting of the Federal Reserve stand at more than 80%. That, combined with profit margins expanding in nontech sectors, should keep the good times rolling in 2026, writes Manish Kabra, Société Générale’s head of U.S. equity strategy, in his newly released 2026 outlook. “Fed rate cuts are unfinished business,” he writes. “[It’s] too early to call the bull run over.”

Of course, there are always areas of concern. Retail sales data this week missed the mark, raising worries about the health of the consumer powering the economy. And if December doesn’t bring the widely expected rate cut, markets are likely going to pass on celebrating the holidays. For his part, Rosenberg Research founder David Rosenberg is worried about the recent volatility, warning that “wild swings can indicate a market top,” as was the case when the dot-com bubble burst.

High volatility, however, was also a feature of the dot-com rally well before the bust, and most strategists feel confident that even if there is a bubble, it’s nowhere near popping yet.

No wonder investors are hungry for more.

Write to Teresa Rivas at teresa.rivas@barrons.com