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The stock market has soared since October 2022, with major indexes posting significant gains.
Two years into the stock bull market, investors are wondering how long the rally will last.
According to stock market experts, the answer is “longer.”
The stock market bottomed on October 12, 2022, marking two years since the start of the ongoing bull market.
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 job market, declining inflation and continued growth in corporate profits have contributed to the stock market’s rise over the past two years.
So what does the bull market have in store from here?
Here’s what market experts told Business Insider about what history tells us about the future of the bull market, which is now in its third year.
Jay Woods, Freedom Capital Markets
Jay Woods, chief global strategist at Freedom Capital Markets, said the most telling thing about the current bull market is that very few people believed in it at the beginning. .
“I think it’s important to preface this by saying when it started. Nobody believed it. They just thought it was a bear market rally. And they suspected there was strength in the market. But then it was just seven stocks,” Woods told Business Insider. .
He added: “And now, all of a sudden, the momentum is strong. And I think that momentum continues. The interest rate cycle is set and widened. We have the wind and this bull market is At least it should last,” he added. It will take another 12 months, maybe 18 months. ”
Woods said he is encouraged by the diversity of market leadership, which is no longer concentrated in mega-tech companies. A recent example is the rotation into utility stocks, which have soared on the back of the AI power demand story.
A common Wall Street expression is that “rotation is the lifeblood of bull markets,” and that appears to be the case.
“It’s nice to look back and celebrate two years, but I feel like the party has just begun,” Woods said.
Carson Group, Ryan Detrick
Ryan Detrick, chief market strategist at Carson Group, says the bull market in stocks is only just beginning.
“While many may think this bull market has gone too far and is outdated, that is far from the case. Historically, bull markets have lasted on average over five years; is actually two years old,” Detrick told Business Insider.
Detrick said that while more gains are expected, he doesn’t expect big return years like 2023 and 2024 so far, when the S&P 500 index rose 24% and 22%, respectively. There is.
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Instead, Detrick said, the average gain in the third year of a bull market is about 8%, which is about the same as the average annual return for stocks.
“Overall, we expect stock prices to rise at least in the low double digits next year,” Detrick said.
Baird, Ross Mayfield
Ross Mayfield, an investment strategist at Baird, said the first two years of the bull market underperformed historically, and he expects the third year of this bull market to deliver stronger returns than history suggests. He said it could lead to.
“The first two years of this bull market have been somewhat subdued by historical standards, so there’s a good chance we’ll outperform the typical third year.” Field told Business Insider.
Mayfield echoed Detrick’s opinion that the average bull market lasts more than five years, so he believes there is “plenty of room to run.”
“Given the interest rate backdrop, expected earnings growth, and subdued investor sentiment, it would not be surprising if the third year of the bull market outperformed the typical third year,” Mayfield said. said.
Rob Howarth, US Bank Asset Management
Rob Howarth, investment strategist at U.S. Bank Asset Management, believes the S&P 500 index could rise to 6,480 in the third year of the bull market, which would give it room to rise 12%.
Howarth’s bullish view is supported by the real driver of the stock’s rise: earnings growth.
Howarth told Business Insider that “the key future indicator of market returns remains the pace of earnings growth.” “Looking to the future, we still see a constructive path forward.”
Howarth expects the S&P 500 index to earn $270 per share next year, which would be about 13% growth from the 2024 consensus level.
“Federal Reserve interest rate cuts and a weak or weak economic scenario should push growth into next year, supporting further stock market gains,” Howarth said.
Read the original article on Business Insider
