As the current bull market in the U.S. stock market marks its two-year anniversary, expectations remain high for its continuation. Driven by the AI boom, the S&P 500 has surged over 63% since it hit a bear market closing low of 3,577.03 points on October 12, 2022. Notably, the index reached a new high for the 45th time this year on November 11, breaking the 5,800-point threshold for the first time.
Historically, the duration of bull markets suggests that this one may persist. With its two-year milestone achieved, it still has a significant way to go to reach the historical average of 5.5 years. According to Ryan Detrick, Chief Market Strategist at Carson Group, this bull market has delivered a total return of 60%, a number that pales in comparison to the historical average gain of 180%.
An analysis by Ned Davis Research into the performance of bull markets reaching their second anniversary highlights that since World War II, there have been 12 instances where bull markets lasted at least two years. In the last decade alone, seven out of ten bull markets continued into their third year, indicating a strong likelihood that the current trend will continue.
The Ned Davis team believes that for this bull market to extend into its third year, three key conditions must be met: First, the trend of anti-inflation initiated at the end of 2022 must persist. Second, the Federal Reserve needs to achieve a “soft landing” for the U.S. economy. Third, large U.S. corporations must maintain their profit growth. Wall Street analysts share an optimistic outlook for the stock market’s future, with many increasing their price targets for the S&P 500.
Oppenheimer notes that there are almost no signs signaling an imminent peak for U.S. stocks, and their analysts project that the S&P 500 could reach 6,000 points by the first half of 2025. They also mention that if the current bull market follows historical averages, the index could continue rising until the end of 2025, potentially hitting around 7,000 points.
Brian Belski, Chief Investment Strategist at BMO Capital Markets, expresses surprise at the market’s robust momentum and describes an upward trajectory for the remainder of the year as the path of least resistance. In his report, he raised his year-end target for the S&P 500 from 5,600 to 6,100 points.
Goldman Sachs has also increased its year-end target for the index to 6,000 points, with a 12-month target set at 6,300 points. However, David Kostin, the firm’s Chief Equity Strategist, cautions that high valuations could limit the index’s growth potential in the upcoming year.
