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The stock market has soared since October 2022, with the major indices posting strong gains.
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With the stock bull market now two years old, investors are wondering how long the rally can last.
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According to stock market experts, the answer is: much longer.
The stock market bottomed on October 12, 2022, marking two years since the start of the ongoing bull rally.
Since then, the Nasdaq 100, S&P 500, and Dow Jones Industrial Average have posted impressive gains of 88%, 62%, and 46%, respectively.
A resilient labor market, lower inflation and continued corporate earnings growth have helped the stock market rise over the past two years.
What awaits the bull market from now on?
Here’s what market experts told Business Insider about what history says about the future of the bull market as it enters its third year.
Freedom Capital Markets, Jay Woods
Freedom Capital Markets chief strategist Jay Woods said the most telling thing about the current bull market is that few believed in it to begin with.
“I think it’s important to say up front: when it started, no one believed it. They just thought it was a bear market rally. And then they questioned whether it had legs, and then it was only seven stocks,” Woods said to Business Insider. .
He added, “And now suddenly it’s powerful. And I think the momentum continues. You have the interest rate cycle, you have widened, we have the wind in our sails, and this bull market should at least continue. another twelve, maybe eighteen months.”
Woods says he is encouraged that market leadership is diverse and no longer concentrated among mega-cap tech companies. A recent example is the rotation into utility stocks, which have risen sharply on the AI energy demand story.
A common phrase on Wall Street goes, “rotation is the lifeblood of a bull market,” and it seems to be paying off.
“It’s good to look back and celebrate two years, but it still feels like the party is just getting started,” Woods said.
Carson group, Ryan Detrick
According to Ryan Detrick, chief market strategist at Carson Group, the bull market in equities is still young.
“While many may think this bull market has gone too far and is getting old, that is not the case at all. If you look back at history, bull markets last an average of more than five years, making this one actually two years old. young,” Detrick told Business Insider.
Detrick said that while he sees more gains ahead, he doesn’t expect another big year of returns like in 2023 and so far in 2024, with the S&P 500 posting gains of 24% and 22%, respectively.
Instead, Detrick said the average gain from a bull market in year three is about 8%, which is right around the average annual return for stocks.
“Overall, we expect shares to rise at least by low double digits over the next year,” Detrick said.
Baird, Ross Mayfield
Baird investment strategist Ross Mayfield said the third year of this current bull rally could deliver stronger returns than history suggests, as the first two years of the bull rally delivered disappointing performance compared to history.
“The first two years of this bull market have been somewhat subdued compared to historical norms, so there is ample opportunity for outperformance versus typical performance in the third year,” Mayfield told Business Insider.
Mayfield also echoed Detrick’s sentiment that the average bull market lasts well over five years, so he thinks there’s “plenty of room to run.”
“It wouldn’t be surprising if the third year of the bull market outperformed the typical year three, given the backdrop of interest rates, expected earnings growth and tepid investor sentiment,” Mayfield said.
Asset management of American banks, Rob Haworth
Investment strategist Rob Haworth of US Bank Asset Management thinks the S&P 500 could rise to 6,480 in the third year of the bull market, a potential upside of 12%.
Haworth’s optimistic view is supported by what’s really driving share prices higher: earnings growth.
“The most important measure of market returns remains the rate of earnings growth,” Haworth told Business Insider. “Looking ahead, we still see a constructive path.”
Haworth expects the S&P 500 to deliver earnings per share of $270 next year, representing growth of about 13% over 2024 consensus levels.
“Lower Federal Reserve interest rates and soft or no landing scenarios will help carry growth into next year, supporting further stock market gains,” Haworth said.
Read the original article on Business Insider
