S&P 500 bull market could continue

The current bull market in the S&P 500 has been going strong for two years. The index has gained over 60% since it started. It is now close to an all-time high.

With S&P 500 at a new high, % of companies making a new 3-month high is a bit soft, but still in double-digit % territory for now
[Past performance is no guarantee of future results] pic.twitter.com/rS4XOhExYh

— Liz Ann Sonders (@LizAnnSonders) October 14, 2024

Wall Street strategists think this trend can continue. They expect earnings growth to speed up and think the economy will stabilize as the Federal Reserve lowers interest rates.

Over past two years, cap-weighted S&P 500 (blue) is up by nearly 63% while equal-weighted version (orange) is up by 40.3%
[Past performance is no guarantee of future results] pic.twitter.com/urTh8fkJYv

— Liz Ann Sonders (@LizAnnSonders) October 14, 2024

The average bull market lasts about 5.5 years and usually returns around 180%. Several strategists predict the S&P 500 will keep rising into next year and 2025.

The bull officially turns two tomorrow.

Up 62.6% the past two years is probably something most didn't have on their bingo card in Oct '22.

The good news? Bull markets last more than five years on avg, so this one likely has more left in the tank. pic.twitter.com/ckx2RWgbGI

— Ryan Detrick, CMT (@RyanDetrick) October 11, 2024

This is based on expectations for faster earnings growth. BMO Capital Markets raised its S&P 500 target to 6,100. Goldman Sachs set a 12-month target of 6,300. However, Goldman Sachs warned that high valuations could limit gains in 2025. Despite optimism, strategists agree valuations are a challenge. The current price-to-earnings ratio is near levels only seen in 2021 and the late 1990s dot-com bubble.

Sustaining momentum in S&P 500

This might suggest the bull market is nearing its end. However, strategists believe high valuations alone do not mean a bull market is ending. Stocks can trade at high valuations for long periods. Citi noted that positive expectations may already be priced in. Piper Sandler added that bull markets usually end due to spikes in interest rates or rising unemployment. Neither seems likely soon. Earnings will be essential for the market to keep going up. Estimates show earnings growing nearly 10% in 2024 and almost 15% in 2025. Investors will need to identify which sectors have accelerating earnings growth. Strategists also highlighted the potential impact of artificial intelligence (AI). Tech stocks have seen significant gains. However, AI’s broader market impact could drive future earnings growth. More companies need to show that AI is improving their margins and profits. High valuations and economic changes present challenges. However, Wall Street strategists remain optimistic about the bull market’s prospects. Continued earnings growth and wider AI adoption could be important for keeping the market’s momentum going.