Over the past five months, the S&P 500 has surged more than 31%, marking one of the strongest rallies in nearly two decades. This performance ranks just behind the rebounds during the 2008 financial crisis and the pandemic period, making it truly remarkable. For investors in major US equity index ETFs, last week proved particularly rewarding, driven by two key factors: market expectations that the Federal Reserve will begin its rate-cutting cycle this week, and robust earnings from artificial intelligence (AI)-related companies that have ignited market optimism.

Notably, the recent surge in AI optimism wasn't sparked by NVIDIA (NVDA.US) news, but rather by Oracle's (ORCL.US) earnings report. Oracle not only delivered better-than-expected results but also provided highly confident guidance, sending its stock soaring over 40%. This performance had profound market implications, even enabling its founder to surpass Elon Musk as the world's new richest person.

**Is the Current Market in a Bubble?**

Despite numerous analysts maintaining that "the current market is in a bubble," stocks continue their upward trajectory. A comparison of the current AI boom with historical booms in railways, telecommunications, and shale oil suggests that if judged purely by market performance, the AI "bubble" should have burst already.

However, investment research firm Multiplo Invest firmly believes we are witnessing a genuine industrial revolution - AI will drive economic growth by enhancing productivity. Some investors may view the current market as similar to previous tech bubbles. In response, Multiplo Invest offers a valuable comparison: one of the defining moments of the internet era was the launch of Netscape, the first browser. The firm considers comparing today's ChatGPT to Netscape highly significant.

Charts comparing the Nasdaq Composite's performance after Netscape's launch with its trajectory following ChatGPT's introduction suggest that asset prices still have room for further gains. According to Multiplo Invest, investors who continue managing their portfolios with a "market bubble" mindset will miss additional opportunities.

**Rate Cuts Driving Stock Gains**

Multiplo Invest notes that while time will ultimately determine whether the current AI sector is in a bubble, one thing appears more certain: the Fed is highly likely to begin cutting rates this week, with the S&P 500 notably approaching historical highs. This scenario has occurred multiple times throughout history and represents this week's most noteworthy insight.

Data shows that since 1980, there have been 22 instances where the Fed implemented rate cuts while markets were near historical peaks. In these 22 scenarios, the S&P 500 averaged gains of 9.8% in the 12 months following rate cuts. More remarkably, stocks rose in all 22 instances within 12 months. This data further supports Multiplo Invest's positive outlook on major US equity indices.

**What's the S&P 500 Target?**

Based on multiple valuation factors, Multiplo Invest has consistently maintained an S&P 500 target of 7,095 points. However, the statistical data mentioned above has prompted further consideration: with the S&P 500 currently around 6,600 points, applying a 9.8% gain over the next 12 months would yield a target of 7,247 points by September 2026. This calculation also confirms Multiplo Invest's optimistic market expectations.

**Potential Risks to the Bullish View**

Of course, the market is not without risks. There's currently an apparent contradiction: August's US Consumer Price Index (CPI) rose 0.4% month-over-month, pushing the year-over-year inflation rate to 2.9%. Notably, this inflation level represents the highest since January this year.

Multiplo Invest states that theoretically, now may not be the optimal time to begin rate cuts. However, Bureau of Labor Statistics revisions to employment data showing weaker-than-expected labor market performance suggest that missing inflation targets may not be sufficient to prevent Fed rate cuts.

Additionally, potential side effects from tariff policies remain to be observed. The market faces other unresolved challenges, such as auto loan default rates reaching 14-year highs. Meanwhile, risks including US debt trends and market concentration issues persist. Charts show that the combined market capitalization of America's 10 largest companies now exceeds the total market value of any single stock market globally, including China, the EU, and Japan.

**Conclusion**

Driven by expectations of Fed rate cuts this week, US stocks have rallied again. The scenario of "indices near historical highs + Fed rate cuts" has occurred multiple times historically, consistently bringing positive effects to equity markets. Oracle's stock price soared due to AI optimism, making its founder the world's richest person. However, many investors still believe in an "AI bubble," failing to fully capitalize on current asset price appreciation opportunities.

Based on this analysis, Multiplo Invest reiterates its buy recommendation for S&P 500 and other major US equity index tracking assets. However, it's important to note that investment markets never offer "absolutely ideal" conditions - risks are always present.