The bull run in the stock market may have much more room to grow.
“We are in the early stages of a bull market where the earnings recovery story has barely begun,” said Ben Laidler, head of equity strategy at Bradesco BBI, on Yahoo Finance’s Opening Bid podcast. Laidler, who has held positions at HSBC and JPMorgan, believes the Federal Reserve may implement two interest rate cuts this year, which could further fuel investor enthusiasm and strong earnings growth. These factors, according to Laidler, could help stocks rise by at least 100% over the next five years.
“Earnings might easily compound at 15% a year if the economy keeps chugging along and you get a little bit of multiple expansion, which I think lower interest rates would justify,” he said.
Early Stages of a Bull Market in the S&P 500
The current bull market for stocks is considered to have started in October 2022, when the S&P 500 (^GSPC) reached its most recent low. Since then, the index has surged by an impressive 55%, driven by enthusiasm around artificial intelligence, propelling companies such as Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL) to record highs.
This momentum has pushed the Dow Jones Industrial Average (^DJI) beyond 40,000 and the S&P 500 beyond 5,000. The S&P 500 has achieved a 15.3% increase in the first half of 2024, marking the 16th strongest start to a year since 1950, according to Keith Lerner, chief markets strategist at Truist. The index has risen in seven of the past eight months.
Upcoming Earnings Season for S&P 500 Companies
Laidler’s thesis will be tested in the upcoming earnings season, beginning with results from major banks such as JPMorgan (NASDAQ:JPM) and Wells Fargo (NASDAQ:WFC). FactSet projects second-quarter earnings growth for S&P 500 companies at 8.8%. If achieved, this would be the highest year-over-year growth rate since the first quarter of 2022 and would mark the fourth consecutive quarter of year-over-year earnings growth for the index.
Significant earnings growth is expected in the Communications Services (18.5%) and Information Technology (16.1%) sectors.
“We are in a very fundamentally supported market. Earnings are recovering, and rate cuts are coming,” Laidler added.
AI Stocks Remain Strong
The outlook for AI stocks remains robust despite their substantial gains, according to Goldman Sachs portfolio manager Brook Dane. The excitement around AI continues to drive investment and market optimism, suggesting further growth potential in this sector.
Conclusion
The S&P 500 appears poised for significant growth over the next five years, driven by strong earnings recovery, potential interest rate cuts, and continued enthusiasm for AI technology. While the market has already seen impressive gains, the fundamentals support further expansion, making the future look bright for investors.
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