We’re on course to witness a monumental moment in the market, as projections point to the S&P 500 reaching the iconic 5,000 mark by next year. This optimistic vision stems from the persistent bull market that has been in effect since 2013 and echoes similar trends we observed in the 1950s and 1980s.
Such a remarkable surge would mark at least a 13% upside for the S&P 500, which was trading at around 4,400 as of last Thursday.
Stephen Suttmeier, a technical analyst at Bank of America, highlighted that the S&P 500’s rally of 24% from its October 2022 low reaffirms the long-term bullish trend that’s reminiscent of the bull markets from 1950 to 1966 and 1980 to 2000.
Drawing from historical parallels, Suttmeier illustrated the correlation between these past bull markets and the current market conditions using an overlay chart. The chart revealed that, based on the recent steady rally, the current bull market could run its course until 2028 or later, potentially cresting above the 6,000 level by 2026.
A promising factor that could fuel this push towards the 5,000 level next year is the presidential cycle. This theory suggests a connection between the performance of the stock market and the four-year term of a US president.
Suttmeier explained, “The S&P 500 often sustains its positive performance in the second half of the year, following an above-average first half during the third year of the presidential cycle. This typically results in a stronger than average second-half return of around 3.9%.”
Historically, while the third year of a presidential term usually yields the strongest stock market performance, the fourth year too frequently brings about robust returns as we head toward an election.
Suttmeier further highlighted the monthly price momentum in the stock market, which appears poised to trigger its first buy signal since July 2020. Such signals have previously indicated key turning points in the ongoing bull market.
Suttmeier added, “The bullish crossing of the Moving Average Convergence Divergence (MACD) line above the signal line this month would confirm the rally of the S&P 500 from the October 2022 low.” Previous signals from July 2020, July/September 2019, September/November 2016, February 2012, August 2009, May 2003, and December 1998 were also recognized as bullish trend continuation signals for US equities.
With the US stock market already demonstrating solid performance, if this bull market roadmap stays its course, we could see the S&P 500 breaching the 5,000 level sooner than many might anticipate. Entrepreneurs and investors, take note – this could be a watershed moment in financial history.