Do historical trends from previous bull markets suggest this one could be coming to a close?
The last few years have been exceptionally strong for markets, and following recent action, the S&P 500 has officially doubled from its October 2022 bottom. Given such sharp gains over the last several years, some investors are questioning the long-term sustainability of this bull market, with overvaluation and a potential AI bubble clouding gains. In light of this impressive run and the risks involved, do historical trends from previous bull markets suggest this one could be coming to a close?
A bull market is typically defined as a period of sustained market gains marked by a 20% increase from recent lows. Meanwhile, a bull market ends when the market declines by 20% or more from recent highs, signaling the start of a bear market. Looking at the S&P 500 (SPX) dating back to 1949, there have been 12 distinct bull markets, including the current one. Because bull markets are defined by sustained 20% gains, the market remained in a bear market from March 2000 to October 2002 despite several short‑lived rallies of more than 20%. Of the eleven other bull markets, they have lasted an average of 5.5 years, gaining 191.5% on average during that span. For context, the current bull market is roughly 3.5 years old, with the S&P 500 up just over 100%. If this cycle were to align with historical averages, it could still have approximately two years remaining and rise just under 50% from current levels, which would compound total gains to the historical average of 190%.
It is important to note that the range of bull market outcomes is extremely wide, as illustrated by the performance of all 12 bull markets seen below. The shortest bull markets last around two years and can gain as little as 50%. Conversely, they can also last over a decade, with the S&P 500 gaining nearly 600% from 1988 to 2000. While the current bull market could very well end soon, history has shown that it’s possible that could run for many more years.
Additionally, looking at previous bull markets that saw the S&P 500 double could give us further context for the outlook of our current market. Seven of the eleven previous bull markets saw the S&P 500 double, taking an average of 3.9 years to do so, closely matching the 3.5 years it took this cycle. On average, the bull markets lasted another three years after initially doubling, during which they gained a further 80% from then until their end. That said, three of the seven ended less than six months after doubling, so there’s certainly no guarantee the market will continue rising for years.
Throughout almost the entirety of this bull market, investors have had something to fret about. 2023 was the most widely anticipated recession in history, yet no weakness manifested. Concerns in 2024 included the U.S. presidential election, higher for longer interest rates, and the potential for a hard landing. The last year has been dominated by tariff woes and geopolitical conflict. Meanwhile, fears about valuations and an AI bubble have plagued investors that entire time. Despite these risks, our current bull market has continued to push higher. Fighting against the market gains is historically one of the least profitable bets to make, as bull markets often last far longer than investors expect. While it’s possible we’re nearing the end of this bull market, domestic equities continue to be a point of strength, and further upside remains the path of least resistance for the time being.
