US Bull Market is 2 years old. What Happens Next?
Sam Stovall of CFRA Research looks at past 11 bull markets for a guide to what happens to Mr Bull Market in the 3rd year.
Mr Bull Market is now in its 2nd year. In year 1, the S&P 500 put in a 22% advance. In Year 2, it put in a 34% advance, which is the highest of all second-year returns.
Altogether, the 2 year bull market has advanced 64% since 2022. This means that the valuations of the US stock market are currently at 25 - the highest second-year valuations since World War Two. This level is a whopping 48% higher than the median second-year valuations.
The average return following the 11 bull markets hat celebrated their 2nd birthday was a mere 2%. What's more, all of them experienced a decline of more than 5% in the next 12 months.
- Sam Stovall, chief investment strategist, CFRA Research
Out of these 11 bull markets, Stovall found that 5 of them experienced a decline of between 10-20% and 3 of them reversed into new bear markets.
One thing seems clear. Things get murkier in the third year of a bull market, which is where we are at.
My Portfolio Implications
Which is why I am going to stop investing in the US market at this point. I'm simply maintaining the current exposure without adding. In my humble opinion, there are three risk factors for 2025.
Valuations are strained at the upper end of all time highs.
The risk of tariffs that the new US President may enact will cause inflation to re-emerge.
This may cause the Fed not to be able to cut rates as quickly as it should.
I would be looking for other markets to invest in. Happy investing, and stay safe!
TERMS OF USE: Some of the information on this website may have changed since the time of writing. By continuing to read this article, you agree to be bound by our Terms of Use and Disclaimer and verify any information before taking action.
LEGAL DISCLAIMER: This content is for informational purposes only. You should not construe such information as material for financial, legal, investment or tax advice. Views and opinions expressed by The Family Investor are personal and not meant to constitute advice. In exchange for using this site, you agree not to hold The Family Investor liable for any claims of damages upon decisions you make after visiting this site.