S&P 500 Shatters 27-Year Record!

The S&P 500, the most closely watched stock market index in the U.S., tracks the performance of the 500 largest companies in the country. Its broad range of industries makes it one of the best indicators of overall stock market health.

Since the start of last year, the index has been on a strong upward trend, driven by the surge in artificial intelligence (AI), a strengthening economy, and the Federal Reserve’s recent decision to begin cutting interest rates. These three factors have combined to fuel the ongoing rally in the stock market.'

Strong Momentum: Why the Bull Market Still Has Room to Grow

The first three quarters of 2024 have been highly profitable for investors, and historical trends suggest that these market gains are likely to continue.

We’ve been in a bull market since October 12, 2022. Although every bull market is different, history provides some insights. On average, bull markets last around 1,866 days, or just over five years. Since we’re approaching two years into the current bull market, this suggests there’s still plenty of potential for further growth.

Since its low point, the S&P 500 has risen about 59%. In comparison, the typical bull market gains around 180%, indicating that this one may still be in its early stages.

There’s more good news: the S&P 500 has climbed roughly 21% during the first nine months of 2024. Historically, when the market delivers double-digit growth by the end of the third quarter, it tends to keep climbing. Since 1990, the index has shown double-digit increases 12 times. In 11 of those years, the rally extended into the fourth quarter, delivering additional gains for investors.

The chart below highlights these trends:

Out of 12 years with strong first three quarters, 11 saw the S&P 500 continue to rise in the fourth quarter, delivering an average gain of 7%. While nothing is guaranteed in the stock market, historical data suggests a 92% chance that the market will keep rallying through the end of the year.

Will investors see positive returns in the fourth quarter? No one can predict the future with certainty, but the odds certainly look favorable based on past performance.

Market Uncertainty and Long-Term Opportunity: What Investors Should Know

Where will the market be by year’s end? The reality is no one can say for sure.

Just this past August, some Wall Street experts were predicting that the market had peaked, with suggestions that the AI-driven rally was fading and the S&P 500 might close out the year at 5,600—lower than its level at the time.

Fast forward six weeks, and the Federal Reserve’s recent interest rate cuts have given the market new life. As of now, the S&P 500 sits at 5,700, continuing to push higher, with analysts updating their models and predicting more room for growth.

DataTrek Research analysts expect the S&P 500 to reach 6,000 by the end of the year, about 5% above its current position. They also forecast earnings-per-share (EPS) growth of 15.2% for S&P 500 companies in 2025, outpacing this year’s 10% growth. If these estimates hold, next year could deliver even stronger returns for investors.

BMO Capital Markets, meanwhile, holds the most optimistic view on Wall Street, raising its year-end target to 6,100. This projection suggests the market could climb another 7% before the year is out.

However, it’s essential to remember that short-term market movements don’t dictate long-term success. What matters most is that, over time, the stock market tends to rise, making it one of the most reliable tools for building wealth. Over the past 50 years, the market has delivered an average annual return of 10%, helping long-term investors achieve financial security.

The takeaway? Investors should focus on buying quality stocks and holding on for the long term. Market fluctuations are inevitable, but patience and a long-term view can lead to substantial rewards.

Disclaimer: The information provided in this article is for informational and educational purposes only and should not be considered financial advice. I am not a licensed financial advisor, and the views expressed herein are solely my own. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions.