Wake up! The US stock market may no longer be a "smooth bull market." Indices are oscillating high, AI is everywhere, but accounts are getting harder to profit: indices haven't fallen, but stocks are sharply diverging—gaining today, losing tomorrow. The market may be entering a late bull market capital slaughter phase? What drives the market now is not just fundamentals, but the Fed, interest rates, and liquidity. AI has shifted from broad rally to concentration, with volatility amplified and opportunities shrinking. If you also feel it's getting harder, this content helps you see the real market structure.
If you feel this way, you've entered one of the most critical phases of the US stock market in 2026—a phase rarely publicly discussed inside Wall Street—
called the late bull market capital slaughter phase. Let me first throw out the three most important things today.
The US stock market is still in a bull structure, but not in a one-sided upward phase. AI remains the main theme, but has shifted from a "broad rally" to a "leader draining rally." What truly determines the market direction is no longer corporate earnings, but the Fed and liquidity.
If you remember only one sentence, remember this: the current US stock market is not about whether it will rise, but whether money is there.
Let's start with the most superficial phenomenon: the S&P 500 has risen for eight consecutive weeks by May 2026—a very rare trend. Historically, such a trend occurs only in two environments.
Extremely loose liquidity, market enters sentiment-driven phase. Clearly, it's the second type now, because of one key change.
The index is rising, but volatility is increasing. What does this mean? It means buying is still there, but selling is also actively emerging. The market is no longer a one-sided consensus, but a tug-of-war between bulls and bears.
Looking at the structure, this rally has an extreme characteristic: it's not a comprehensive bull market but extremely concentrated.
Money is almost entirely concentrated in one place? Artificial intelligence infrastructure, including three major directions: computing chips, cloud computing, data centers.
You can understand it in one sentence: AI is eating up all the liquidity of the US stock market. That's why Wall Street institutions are still raising targets.
Goldman Sachs, Morgan Stanley, and many institutions are pushing S&P 500 targets toward 8,000 points or even higher. But here's a key issue many retail investors don't realize: when institutions start to be unanimously bullish, the market has often entered a "prematurely discounted expectations" stage.
What does that mean? It means the future upside space has already been pre-bought by current prices.
Next, we enter the second layer of logic, the most core variable in the market now.
The Fed.
In the past, this US stock rally had essentially one logic: the market was trading on rate cuts. As long as rate cut expectations existed, tech stocks could keep getting revalued higher.
But now this logic is showing cracks, because the Fed is becoming cautious again, even leaning hawkish.
The key change is just one sentence: inflation hasn't fully ended, and is becoming more complex. The inflation pressure you see now is no longer a single factor.
It's a superposition of three structures: services inflation remains stubborn, wage levels haven't clearly fallen, and energy prices still have uncertainty.
But the most easily overlooked point is that a variable is emerging—and it's critical: AI itself is creating new cost inflation.
In short, AI is not only making money; it's also raising the entire economy's cost structure. Data centers need electricity, chips need capacity, computing power needs equipment, talent costs are soaring—all of these push up the "underlying structure" of inflation. This leads to a very dangerous result.
The Fed's task becomes complex. It's not considering "whether to cut rates" but a more realistic question: will inflation spiral out of control again?
That's why the market is repricing a risk: interest rates may not fall quickly, and in extreme cases, may even rise again.
Next is a very key point, also the core that many ordinary investors most easily overlook. Let me break it down clearly. Since you've read this far, you might as well subscribe to Frost Snow so you don't lose me later.
What does a rate hike mean for the market? Rising cost of capital—simply put, borrowing becomes more expensive, enterprise expansion slows, speculative funds decrease.
Treasury yields rise, directly sucking market liquidity because bonds become more attractive, funds flow from stocks to bonds.
Tech stock valuations are compressed—this is the most deadly point, because tech stocks are essentially discounted models: future money is "discounted" in a high interest rate environment.
The higher the rate, the lower the valuation. So you'll see a very typical phenomenon: good companies are still good, but their stock prices fluctuate violently.
Not because fundamentals have worsened, but because the valuation logic has changed.
That's also the real hidden risk in the market now: capital crowding. The US stock market now has a rare state: not a lack of money, but all money concentrated in a few places. After AI became the only main line, funds are highly concentrated in a few leaders.
This brings a side effect: market flexibility worsens, volatility increases, rotation speeds up. But a bigger variable is emerging.
Super IPO expectations. For example, SpaceX, OpenAI, and a batch of AI unicorns. If these companies start to list in a cluster, a very key thing will happen. In the simplest terms: new companies need money, which means old companies will have funds diverted. Market money is not infinite, so you'll see a contradictory phenomenon.
AI is still rising, but volatility is increasing, because funds are both buying and retreating. Next, we enter the stock level, also today's most critical risk amplifier.
First, look at Micron Technology. This stock can no longer be understood as a traditional cyclical stock; it's being repriced. In the past, Micron was a typical cyclical stock, relying on supply-demand fluctuations, with unstable profits and naturally low valuations. But now structural change has occurred.
What AI brings is not just growth, but a rewrite of demand structure. Data center expansion, large model training, cloud computing upgrades—all are pushing up memory demand.
So the market's pricing logic for Micron now: not a cyclical stock, but an AI infrastructure stock. Earnings data is astonishing: revenue nearly doubled year-over-year, profit surged several times. This growth is no longer improvement—it's an explosion.
But I must remind you of a very key point: the more this accelerated rise stage, the more likely violent shocks occur, because the market has entered a state where everyone is making money, but no one dares to leave early.
Why is the AI rally entering "the last most dangerous acceleration phase"? And how does the latest Fed signal directly affect the boundary of the AI bubble?
Let's continue.
If you've heard this far, you should gradually realize one thing:
The current market is no longer simply "bullish or bearish," but has entered a more complex stage—
called: indices are fine, but trading gets harder and harder.
Why does this happen? Because the US stock market has essentially changed from a "trend market" to a "structural market."
What does that mean? The index can rise, but internally it's torn. Funds rotate back and forth, sectors rotate quickly, stocks diverge sharply.
You see a bull market, but many people's account experience is actually a volatile market or even a "fake bull market."
If you still use "one-sided rising mindset" to trade, you'll definitely get whipsawed. Let's first look at the index rhythm.
The S&P 500's current state is very clear: the trend isn't broken, but it has entered a high-level oscillating range.
This stage has a very typical characteristic: the rise slows down, but pullbacks also can't go down.
What does that mean? Both bulls and bears are testing. Bulls don't want to give up the trend; bears don't dare to smash directly.
So the index shows a "dull knife market": slow rise, sideways, occasional spikes.
But this kind of market is most prone to one thing: creating an illusion—"it seems it won't fall."
And real big volatility often brews in this stage. The core reason for increased difficulty in making money now:
In the past, buy AI, easy win. But now: AI itself is also diverging. Simple logic:
Within the AI sector, funds are doing three things: continue hugging core leaders, rotate among high-level leaders, switch from high-valuation AI to low-valuation defensive sectors?
So you'll see a phenomenon: some AI stocks are still hitting new highs, but some have started to consolidate or even fall.
This is not the end of the bull market; it's funds "reallocating risk."
This stage is the most dangerous. Some AI companies report earnings that beat expectations, and their after-hours prices surge 30-40 points.
This kind of rally looks exciting, but essentially has one feature: emotions one-time exhaust future expectations.
The most common pattern for these stocks the next day? Not continuing to rise, but: gap up + large oscillation + spike and fall, as short-term funds have already cashed out profits.
Okay, after covering the rhythm, let's talk about something more important: the risks in the market now are not single risks, but overlapping risks.
Let me break it into four layers. First layer: interest rate risk. This is the most fundamental and core. As long as the Fed doesn't cut rates, or even sends hawkish signals, the market will remain suppressed.
Note a key point: the market now is not afraid of high rates, but afraid of one phrase—"rates remain high for a long time."
Because this directly changes the valuation system. Previously, the market could give AI companies 30x, 40x, or even higher valuations, but in a high rate environment, this valuation will be "systematically compressed."
Second layer: earnings realization risk. Now AI's biggest logic is "future growth."
But the problem: future growth must continuously materialize. Once there is: growth below expectations, or excessive capital expenditure, or declining profit conversion efficiency,
the market will be very sensitive.
Because current valuations essentially "pre-discount the next three years."
Third layer: liquidity risk. Many overlook this. Now the market has two opposing forces:
On one side, AI is continuously absorbing funds; on the other, super IPO expectations are draining funds.
For example, if large tech IPOs list in a cluster, one thing happens: the market needs to "free up money." Where does money come from?
It can only come from assets that have already risen. So you'll see a phenomenon: indices can still rise, but stocks start to oscillate violently.
Fourth layer: sentiment risk. This is most easily overlooked but has the biggest kill power. Now the market has a typical sentiment structure: "the more it rises, the less fear; the more it falls, the more you buy." This is actually typical late bull market sentiment. Historically, all major top areas have a common point:
Not that bad news appears, but that good news is magnified infinitely. Okay, let's further dissect institutional behavior, which many truly don't understand. What Wall Street is doing now is not "bullish or bearish."
They are doing three things: pushing up core asset valuations, gradually cashing out profits at highs, and pre-positioning for the next structure.
What does that mean? Simply put: they tell a bull story while shifting positions. The rise you see is trend funds pushing. What you don't see is long-term funds slowly reducing positions. That's why the market looks strong but volatility increases.
Next, we enter the most important part today:
Let me directly break down three scenarios.
First scenario: index gaps up. If the S&P gaps up and challenges the upper resistance area: remember one sentence: it's not strength, but "sentiment premium." In this case, the most likely is: spike and fall. Strategy: don't chase, just observe, wait for a pullback.
Second scenario: gaps down and oscillates. If the market slightly gaps down: this is actually the healthiest state. Because it means the market is digesting previous profits. In this case: structural opportunities will appear, but only suitable for leader pullbacks, not all-out attack.
Third scenario: intraday spike and fall. This is the most common and also the most dangerous. Feature: strong in the morning, weak in the afternoon, oscillating at the close.
What does this show? It shows funds are cashing out. This kind of market most taboo: chasing highs + heavy position + overnight.
Okay, let's give a complete risk map summary:
The real state of the market now: not a bear market, not a crash, not a one-sided bull market.
It is:
Slow rise at highs + internal sharp divergence + repeated sentiment pulling.
So if you ask me to summarize the US stock market now in one sentence:
I would say:
The market is still in a bull structure, but trading has entered a high-difficulty mode. Finally, I give you three very realistic judgment criteria to help you identify market phases:
If the index rises but you can't make money, the market has entered a divergence phase. If good news keeps increasing but volatility increases, it indicates late sentiment phase. If everyone starts to get used to "buy the dip on pullbacks," it means risk is accumulating. Finally, I leave you with a question:
The US stock market you see now: is it the start of a new super cycle, or a mid-stage high-level structural bubble?
Do you now prefer to continue holding core AI assets or start gradually reducing risk? What do you think the Fed's next move will be—continue hawkish or be forced by the market to turn dovish?
Welcome to tell me your judgment in the comments.
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