The S&P 500 is in its third year of a sustained bull run. The index is up almost 40 per cent over the last year and has nearly doubled in value over the previous five years. But how long can the S&P 500 continue its run?

S&P 500 predicted to reach 6,0000

Whether the S&P 500 breaks through the 6,000 mark is a question of when, not if, according to one chief analyst’s bullish prediction, commenting after the index hit a record high on Thursday, Nigel Green, CEO of deVere Group said:

“China’s recovery means stronger demand for American exports and global supply chains roaring back to life. With China pumping liquidity into its economy, it’s creating a tidal wave that can be expected to lift all (or mostly all) boats – and the S&P 500 is positioned to benefit in a big way.

“The question isn’t if the S&P 500 will hit 6,000 – it’s when.”

As well as the Chinese economy whirring back into life, the economy is benefitting from cooling inflation, Mr Green said, leaving banks more wiggle room to wind down rates and encourage spending in the economy. He added:

“With inflation pressures cooling off, global monetary policy is moving into a more supportive phase. Major central banks are expected to continue to ease rates, with whispers of cuts growing louder by the day,” notes the deVere Group CEO.

“Lower rates are a dream for equity investors. With cheap money flowing, companies can borrow, invest, and grow faster, and stocks naturally benefit.

“For investors, this is the kind of environment you wait for – a once-in-a-cycle opportunity to capitalise on a wave of liquidity.”

Could the S&P 500 reach 10,000?

Some analysts are predicting the S&P500 could reach 10,000 before a bear. An October report from Barron’s said it shouldn’t be ruled out. Writing for the magazine Ian Salisbury wrote:

“History Says It Can. The stock market has had a great run over the past two years. History suggests it could rally a lot further before the next significant downturn.”

A June report from the Motley Fool argued the stock market could break through five figures at the end of the decade:

“To see it more clearly, turning the current market of 5,300 into 10,000 requires a compound annual growth rate (CAGR) of 13.5 per cent over the next five or so years. While I wouldn’t expect linear growth, that’s a reasonable expectation under optimistic conditions.

“On a more practical note, using historic annual return average rates of 10% for the S&P 500, that target should still be achievable by 2032.”

However past results are no guarantee of future trends and the current rate of growth is unlikely to hold up in perpetuity.

Is the S&P 500 headed for a correction?

The bad news, according to analysts at Goldman Sachs, is that the S&P 500 is headed for a correction, which could look like an extended period of slower growth. The good news is that correction is forecast to take place in the next decade and not any time soon.

Analysts issued a pessimistic forecast of 3 per cent annual growth, at the bottom range of current estimates. As Investopedia reported:

“Goldman analysts forecast the S&P 500 will return an average of just 3% a year in the next decade, a far cry from the 13 per cent average annual return of the last 10 years. That would rank in the bottom decile of comparable periods in the last century. It also puts the odds that stocks fail to outpace inflation at about 33 per cent.

 “Goldman’s forecast is far below the consensus on Wall Street. According to its analysis of the publicly available capital markets assumptions of 21 asset managers, other 10-year forecasts for S&P 500 performance range from a low of 4.4 per cent to a high of 7.4 per cent, with the average being 6 per cent.”

While the analysis may transpire to be doveish, it does form part of a wider consensus that the S&P 500 is headed for a slowdown over the next decade. Digging into the analysis, Axios provides instructive analysis on why this forecast should serve as a reminder to maintain a diverse portfolio:

“In effect, the Goldman and similar forecasts are a prediction that the worm has turned, and the decade ahead will reward that diversification.

“Maybe the AI revolution will involve winner-take-all effects and such massive capital spending needs that the winners of the last decade will also be the winners of the next decade, propelling the S&P much higher despite historical warning signs.

“In deciding whether to go all-in on the S&P or diversify your stock investment more among value-oriented, smaller, and international companies, you are implicitly betting on one of those narratives.”

So, while there may be a real opportunity with the S&P 500 right now, always take professional financial advice before making any investment decision, to ensure you properly spread your risks.

Warning over imminent S&P bear

While the analyst consensus is that the S&P 500 has plenty of road to run, one investment firm has issued a warning over an ‘imminent bear market.’

Hong Kong-based Gavekal Research said in a September note: “It is often only at the end of a bear market that I understand why it took place.

“At such moments of illumination, it is usually the case that one should be buying rather than selling equities. Thus, the goal of this paper is to warn that a bear market may be imminent.”

The gloomy finding was based on a comparison between the market and the price of gold. The market has historically outperformed the commodity – but on the occasions when it has failed to do so, bear markets have often followed.

Is there an opportunity in the S&P 500 right now?

On the optimistic side, some analysts predict that the index will break through 6,000 and could even reach 10,000 within the next decade, driven by factors like China’s economic recovery, cooling inflation, and favourable global monetary policies. These conditions create a fertile environment for growth, with opportunities for investors to capitalise on a wave of liquidity and lower interest rates.

However, not all forecasts are so rosy, with some predicting a pronounced slowdown in the medium to long term. This could signal a period of slower returns, especially when compared to the explosive gains of recent years. Some, like Gavekal Research, even warn of an imminent bear market, citing historical trends where the market underperformed relative to gold.

Ultimately, while the current bull run may have more momentum, investors are advised to stay cautious and diversify their portfolios to mitigate risks. The market’s trajectory may still hold promise, but no one can predict the future with certainty.