The S&P 500 did this for the first time in 13 years. Here’s what happens next, according to the story.

The S&P 500 (^GSPC 0.40%) is the most followed stock market index in the United States and includes the 500 largest companies in the country. Because it includes a wide range of American companies, it is also considered by many to be the best general benchmark and most reliable measure of the stock market’s overall performance.

The storied index has been in full rally mode since its low point in October 2022, driven by falling inflation, advances in artificial intelligence (AI) and the Federal Reserve Bank’s long-awaited decision to begin its interest rate cutting campaign. These factors have combined to create an environment ripe for the stock market rally to continue.

The S&P 500 just delivered its best January-September performance since 1997 and has now entered the third year of its current bull market run, something not seen since 2011. If history is any indicator, the current rally still has plenty to go on.

A bull can run far

After the worst bear market since 2009, investors are enjoying the good times – and they should. History shows that bull markets are more persistent and tend to last much longer than their bearish counterparts.

According to Bespoke Investment Group, the average bull market since World War II has lasted about four and a half years. For comparison, that’s much longer than the average bear market, which lasts about a year.

However, not all bull markets are the same. For example, the bull market that began in 1987 lasted more than 12 years, while the bull market that began in 2009 lasted 11 years. At the other end of the spectrum, the bull market that began in 2001 lasted just three months.

The current rally has just completed its second full year, so if the story is true, this bull market has yet to continue. Of the 13 bull markets that have occurred in the last 77 years, seven have lasted three years or longer, so history is on the side of the bulls.

Then there is the question of returns. Bull markets have generated returns of 152% on average, which bodes well for current investors. However, market gains varied widely depending on the length of the rally. For example, the bull market that began in 1987 returned 582%, while the bull market that began in 2009 returned 400%. However, the short-lived rally of 2001 – which lasted just three months – only produced a 21% return.

In general, the longer the bull market lasts, the greater the potential returns. This also applies to the current run. Looking back to October 2022 – the start of the current market rally – the S&P 500 has returned 63%. If the story is true, there is much more to the current bull market.

Data from YCharts.

Where do we go from here?

There are many opinions about the market and further developments. Goldman Sachs Chief U.S. equity strategist David Kostin just raised his 2024 year-end target for the S&P 500 to 6,000 and his 2025 target to 6,300. This suggests that the index will reach another 3% after already posting 22% gains this year. It also suggests that the S&P 500 will rise 5% in 2025.

While market forecasters offer their best guesses about what will happen from here on out, the truth is that no one knows for sure. If the economy continues to advance and business and consumer spending continues, the current bull market has a chance to join some of the longer bull runs in history.

However, things don’t always go as planned. Investors should be aware of the possibility of a “black swan” event, a random and seemingly unpredictable event that can have a huge impact on the financial landscape. Think of the 2008 financial crisis or the recent global pandemic. Many bull markets have been derailed by a black swan.

Does this mean investors should retreat and fear the worst? Far from it. Market legend Peter Lynch – one of the most successful investors of all time – said: “Investors have lost far more money preparing for corrections or anticipating corrections than from the corrections themselves.” This knowledge is intended to help investors mentally prepare for unpredictable events.

The biggest takeaway from this exercise is that time is the biggest advantage investors have. As the chart above shows, the stock market has delivered robust returns over time despite market declines. Buying high-quality stocks and holding them for the long term is the best strategy for thriving in a bull market. Additionally, if you continue to add to your portfolio at regular intervals – a process known as “dollar-cost averaging” – and maintain it through both bull and bear markets, you can develop the discipline necessary to stay ahead regardless of the Conditions to be successful.

The stock market has returned an average of 10% per year over the past 50 years, demonstrating the benefits of long-term investing.