US Bull Market Unstoppable! What's Next?
1min read The US stock market continues to ride a powerful bull run, with the Dow Jones, S&P 500, and Nasdaq hovering near record highs. This rally, which began in late 2022 and was confirmed by mid-2023, shows no immediate signs of faltering.
Historical patterns suggest there's more room to run. At two years, the current bull market is significantly shorter than the average duration of 5.5 years, and its total return of approximately 60% is far below the typical 180%, according to Ryan Detrick, Chief Market Strategist at Carson Group.
Wall Street analysts remain optimistic. With the Federal Reserve initiating rate cuts, earnings growth accelerating, and the economy displaying resilience, strategists forecast further market gains through year-end and into 2025. However, with equity valuations already stretched, some analysts urge caution.
Which Sectors Will Lead Next?
Earnings growth remains a pivotal driver. Consensus estimates predict S&P 500 earnings will grow nearly 10% in 2024 and 15% in 2025. Investors should focus on sectors with accelerating, not just steady, earnings growth.
Scott Chronert, Citi's equity strategist, continues to back the Magnificent Seven tech giants, citing the enduring influence of AI. However, he expects a shift in focus toward the broader market impact of AI. Companies outside the core AI ecosystem—those not manufacturing chips or operating cloud servers—could benefit as they integrate AI to improve margins and profitability.
For AI-driven growth to continue lifting the broader market, more firms will need to deliver tangible results, a process that Chronert believes could take 2–5 years.
What Could End the Bull Run?
High valuations alone don't end bull markets—market downturns typically require a catalyst. Two common triggers are rising interest rates and increasing unemployment. Currently, neither condition seems imminent. The Fed has begun a rate-cutting cycle, and while the labor market is softening, it remains healthy overall.
Still, elevated valuations could limit future returns. David Kostin, Goldman Sachs' Chief Equity Strategist, warns that these high levels might constrain how far the indices can climb in 2025. Kevin Gordon, Senior Investment Strategist at Charles Schwab, points out that similar valuation extremes occurred only during the dot-com bubble and in 2021, suggesting the current bull market may be aging.
Conclusion
The US bull market seems poised for continued gains, supported by a favorable macroeconomic backdrop and robust earnings growth. However, investors should temper expectations, given stretched valuations and potential volatility ahead. Identifying sectors with tangible growth prospects, particularly in AI, will be key to navigating the next phase of this bull run.