The bull market just turned 3-years old – How long do they typically last after making that milestone?

The S&P 500 bull market has marked its three-year anniversary since its October 2022 low, having gained 89% to reach new highs. Historical analysis by CFRA Research indicates that bull markets reaching this milestone typically extend for 6.5 years, with the fourth year averaging a 12.7% advance, while Oppenheimer suggests a 20% gain for longer-lasting cycles. This outlook is supported by the AI trade, anticipated Fed easing, and strong corporate earnings, which are expected to benefit growth stocks, communication services, and information technology. However, concerns such as an AI bubble, inflation, fiscal deficits, and geopolitical tensions like tariff threats suggest the market's fourth year could be marked by significant volatility.

Analysis

The S&P 500 bull market has reached its three-year anniversary, having advanced 89% since its October 2022 low. Historical analysis by CFRA Research indicates that bull markets celebrating their third year have lasted an average of 6.5 years and gained 213%, suggesting significant potential for further upside. CFRA projects an average 12.7% advance in the fourth year, while Oppenheimer's analysis of longer cycles suggests a 20% gain.

Current market conditions are bolstered by several supportive factors, including the robust artificial intelligence trade, the anticipated restart of the Federal Reserve's easing cycle, and strong corporate earnings. These elements are expected to particularly benefit growth stocks, communication services, and information technology sectors. The absence of traditional warning signs like narrowing breadth further supports an extended bull cycle, potentially into 2026.

Despite the positive outlook, significant concerns persist, contributing to a "mixed" sentiment and "cautious" tone. These include worries about an AI "bubble," ongoing inflation, a weakening labor market, and a ballooning fiscal deficit. Geopolitical risks, such as renewed threats of sky-high tariffs on China, have already demonstrated market impact, indicating that the market's fourth year could be highly volatile.

Key Decisions for Investors

• Maintain strategic exposure to growth-oriented sectors like AI, communication services, and information technology, aligning with anticipated Fed easing and strong corporate earnings.
• Prepare for heightened market volatility in the bull market's fourth year, as indicated by historical patterns and current concerns regarding an AI bubble, inflation, and geopolitical tensions.
• Closely monitor macroeconomic indicators such as inflation, labor market health, and fiscal policy developments, alongside geopolitical events like tariff threats, to inform tactical adjustments.