Why the stock market could keep rising

Looking for parallels

With all major indeses at all-time highs, I believe we have no choice but to consider the bear market of 2022 over and a new cyclical bull market begun.

From the October 2022 low, the S&P 500 is up more than 40% in total return terms (as of mid-March), which from a historical perspective is relatively young. That’s part of the reason why I think this youngish cycle could last longer.

During secular trends (long-term economic trends and market cycles), cyclical bull markets have produced maximum returns of 60%–75% (I’m thinking of the 1968 to 1982 one in particular). Stocks have not reached that historical trend yet during this cycle. Another interesting comparison is the 1967–1968 soft landing, which was one of the shortest cyclical bull markets ever (which resulted in a 50% gain). We haven’t reached those types of gains yet either.

I’ve been thinking about the mid/late 1990s cycle as well. Specifically, how the Magnificent 7 (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) share some similarities with the leading stocks back then (remember the “Nifty 50”?). Like that cycle from roughly a quarter century ago, much of this cycle’s gains have come predominantly from a handful of stocks.

But remember that all markets are unique, and we are starting to see more broadening of this rally in recent months—gains aren’t as concentrated in the Mag 7 as they were back during most of 2023. To wit, 79% of the market is currently above its 200-day moving average, which is a sign that more and more stocks are participating in the rally (even if they are not outperforming the market).