The S&P 500 is on track to achieve back-to-back years of over 20% gains. This has only happened eight times since 1950. The current bull market started on October 12, 2022.
It has delivered gains of about 68% so far. The average bull market lasts just over five years and delivers gains of 180%. Ryan Detrick, chief market strategist for Carson Group, looked at data back to 1950.
He found eight times where the S&P 500 had annual gains of 20% or more in a row. In six of those cases, the rally kept going into the third year. The average return in the third year was 12%.
The economy is strong and corporate profits are rising. This gives more reasons to be optimistic. Inflation has dropped to the lowest level in over three years.
S&P 500 companies are expected to generate earnings per share (EPS) of $269 in 2025. That’s a 19% increase from early 2023.
Sustained growth boosts investor confidence
When Wall Street’s earnings estimates go up, it usually means the market will do well. Several top analysts have a positive outlook for 2025. Deutsche Bank raised its year-end target for the S&P 500 to 7,000.
That implies a potential 16% gain from current levels. Ed Yardeni of Yardeni Research is even more bullish. He predicts the index will reach 7,000 next year, 8,000 in 2026, and 10,000 by 2030.
Yardeni expects corporate earnings to increase. He projects EPS will grow from $250 this year to $275 next year, and $300 the year after. For long-term investors, short-term changes in the S&P 500 matter less.
Over the past 50 years, the stock market has delivered an average annual return of 10%. Patient investors have been rewarded. No one can predict the market with 100% certainty.
But historical data, a strong economy, rising corporate profits, and positive sentiment from Wall Street all suggest the bull market will likely continue into 2025. Investors should stay alert, but the outlook is good for those who take a long-term view.
