The S&P 500 (^GSPC 0.09%) recently reached a new record high for the first time in more than two years. That means the index is officially in bull market territory. Some key dates from the last two years are detailed below:
- January 3, 2022: The S&P 500 hit a record high as excitement surrounding the COVID-19 recovery came to a head. While not yet evident, the S&P 500 reached its bull market peak on this day, marking the onset of a new bear market.
- June 13, 2022: The S&P 500 finished the day down more than 20% from its high, confirming the onset of a new bear market five months earlier. Recession fears arising from fierce inflation and aggressive interest rate hikes were the driving forces behind the stock market drawdown.
- October 12, 2022: The S&P 500 finished the day 25% below its record high, representing more than $10 trillion in value destruction. While not yet evident, the S&P 500 reached its bear market low on this day, marking the onset of a new bull market.
- January 19, 2024: The S&P 500 finished the day at a new record high, confirming the onset of a new bull market 15 months earlier. Exuberance surrounding economic resilience and artificial intelligence were key drivers behind the stock market rebound.
So, what comes next? Historically, the S&P 500 has moved much higher during the two-year period following a new bull market. To be perfectly clear, all forecasts are fallible, and predictions always involve some guesswork, so investors should never lean too heavily on such speculations. That said, studying the stock market's past performance can still provide worthwhile insight.
SNPINDEX: ^GSPC
Key Data Points
History says the stock market could soar in 2024
The S&P 500 has been through 10 bull markets since its inception in March 1957, according to Yardeni Research. The chart below details the start date for each bull market, and it shows how much the S&P 500 gained during the subsequent two years.
|
Bull Market Start Date |
S&P 500 Return (24 Months Later) |
|---|---|
|
October 1957 |
43.7% |
|
June 1962 |
55.7% |
|
October 1966 |
27.2% |
|
May 1970 |
59.7% |
|
October 1974 |
67.3% |
|
August 1982 |
61.5% |
|
December 1987 |
56.9% |
|
October 2002 |
44.5% |
|
March 2009 |
95.1% |
|
March 2020 |
99.2% |
|
Average |
61.1% |
Data source: Yardeni Research, YCharts. The chart details historical S&P 500 gains during the two-year period following the onset of new bull markets.
As shown above, the S&P 500 gained an average of 61.1% during the two-year period following the onset of past bull markets. That average can be applied to the current bull market to make a somewhat educated guess about the stock market's trajectory. Specifically, the S&P 500 is up 36.1% since the current bull market started on Oct. 12, 2022. That implies upside of 25% through October 2024.
To be clear, that number is an estimate. Past results are never a guarantee of future returns. Every bull market is defined by unique circumstances. For example, the current bull market was preceded by a global pandemic unlike anything the world had seen in over a century. The fallout from that event -- supply chain chaos, government stimulus payments, rampant inflation, and rapid interest rate increases -- means the stock market may not perform as history suggests.
That said, investors can still learn something from the chart. The S&P 500 tends to rebound quickly once a bear market ends. Unfortunately, it is impossible to recognize the end of a bear market in real time because the S&P 500 must reach a new high before the bear market has conclusively run its course. That means market-timing strategies are prone to failure.
For instance, the current bull market started on Oct. 12, 2022, but that wasn't clear until Jan. 19, 2024. The S&P 500 returned 36.1% between those points in time. So investors missed out on substantial gains if they waited for definitive proof that the previous bear market was over. To that end, the most prudent strategy is to stay invested through good times and bad times.
A more prudent way to think about future stock market returns
Investors trying to forecast future stock market returns should consider the performance of the S&P 500 across all market environments. For instance, the index gained 1,730% over the last three decades, compounding at 10.1% annually. Importantly, the S&P 500 achieved those returns despite suffering four bear markets and three recessions.
To that end, investors can reasonably expect similar returns in the future. That does not mean the S&P 500 will go up 10% every year, but an average return of 10% per year is likely over long periods of time. From that point of view, there is never a wrong time to buy good stocks at reasonable prices.
