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NDR strategists said the two-year stock bull market could last another year.
That assumes three positive catalysts work properly, they added.
The firm’s analysis shows that the median increase in the third year of a bull market is about 13%.
According to Ned Davis Research, the recent bull market in stocks could last for a long time yet.
Strategists at the research firm said the two-year bull market could continue for another 12 months. In a note this week, NDR said there’s no reason stocks can’t rise as long as three positive factors continue to push the market higher.
Of the 13 bull markets that lasted for at least two years since 1949, stock prices rose for three consecutive years unless the economy went into a downturn or experienced a black swan event, such as the European or U.S. sovereign debt crisis. Continuing. According to the company, its credit rating was downgraded in 2011.
In one instance, a bull market ended when the Fed surprised investors by reversing its decision to cut interest rates.
If stocks avoid negative impacts, bull markets tend to last at least three years, strategists say. ned davis research
“Bull markets don’t die of old age,” the strategists wrote. “This table supports our view that barring a Fed policy error, hard landing, or external shock, the path of least resistance is a continuation of the bull market.”
Of all bull markets lasting at least three years since 1949, stock prices have risen a median of 13.1% in the third year, according to Ned Davis Research.
The S&P 500 index has risen 60% since the index entered bull market territory in October 2022. These gains are mainly due to three positive factors, and as long as the positive factors continue, the stock is likely to continue doing well, the company said in a play.
Disinflation: Calming inflation “defined” the current bull market, the firm writes. While progress in lowering inflation appeared to stall in the first half of the year, prices continued to trend closer to the Fed’s 2% inflation target, reaching 2.5% in August.
Avoiding recession: If the U.S. is to stay strong, stocks need a soft landing. However, strategists said the risk of recession appears “low in the near term” as GDP remained steady at 3% last quarter.
Strong Earnings: For the market to continue its upward trend, corporate earnings growth must be strong. Third-quarter earnings growth for S&P 500 companies is estimated at about 4.6%, according to FactSet. If that turns out to be true, it would be the fifth consecutive quarter of profit growth, the analytics firm said in a note.
“We remain bullish on U.S. stocks both in absolute terms and relative to bonds and cash,” the strategists added.
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