S&P 500 Projected to Double in Value Within Five Years

The current bull market in stocks could have significant room for growth.

“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 previously held positions at HSBC and JPMorgan, believes the Federal Reserve may lower interest rates twice this year, which could further stimulate investor confidence and strong earnings growth. These factors, according to Laidler, could contribute to a stock market rise of at least 100% over the next five years.

“Earnings might easily compound at 15% a year if the economy keeps performing well and we see some 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 widely considered to have commenced in October 2022, when the S&P 500 (^GSPC) reached its most recent low point. Since then, the index has experienced a remarkable surge of 55%, fueled by enthusiasm surrounding artificial intelligence, propelling companies such as Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL) to new record highs.

This momentum has propelled 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 prediction will be put to the test 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 represent 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 market with very solid fundamental support. Earnings are recovering, and rate cuts are on the horizon,” Laidler added.

AI Stocks Remain Strong

The outlook for AI stocks remains positive despite their substantial gains, according to Goldman Sachs portfolio manager Brook Dane. The excitement surrounding 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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