The S&P 500 bull market recently marked its third anniversary, showing remarkable performance with an increase of over 80% since its closing value of 3,577 on October 12, 2022. As the market continues to thrive, analysts are optimistic about its prospects for the future.
Jeffrey Buchbinder, LPL Financial’s chief equity strategist, expressed confidence in the market’s continuation. He noted that historical trends indicate bull markets that reach a three-year mark often extend beyond that period. “Bull markets lasting three years tend to keep going for a while,” Buchbinder stated in a recent note.
LPL’s analysis suggests that the average duration of bull markets is around five years. Notably, the bull markets of 1990 and 2009 lasted approximately twice as long. “This bull market is not old. In fact, it is far from it,” Buchbinder asserted, indicating that there is still substantial potential for growth.
Furthermore, the S&P 500 typically experiences a significant rally in its fourth year, averaging 12.8%, which is four times higher than the average returns seen in the third year. Historical data shows that six out of the seven bull markets that extended into a fourth year recorded positive results during that time.
Despite substantial gains, a small number of stocks have driven nearly half of this bull market’s performance. Specifically, just seven stocks have accounted for a significant portion of these returns, with Nvidia alone contributing 14.8% to the overall increase. This concentration suggests that the remaining 493 stocks within the S&P 500 still have ample room to contribute to the market’s progression. “The 493 will have to step up and carry more of the load to keep this bull market going,” Buchbinder remarked.
The broader economic landscape appears conducive to continued growth, with inflation remaining stable and interest rates trending downward. Buchbinder highlighted factors such as resilient economic growth, anticipated fiscal stimulus, a dovish Federal Reserve, and strong earnings, particularly in the technology sector, as indicators that the bull market has room to expand. “We’ll probably be celebrating a fourth anniversary next year at this time,” he concluded.
As the market gears up for another potential year of growth, stakeholders will be closely monitoring the performance of additional stocks and macroeconomic indicators.
