The S&P 500 did this for the first time in 13 years. Here's what history says will happen next.

the Standard & Poor's 500 (^GSBC 0.40%) It is the most widely followed stock market index in the United States and includes the country's 500 largest companies. Because it contains a broad range of US companies, it is also considered by many to be the best overall benchmark and the most reliable measure of overall stock market performance.

The popular index has been in rally mode since it bottomed in October 2022, driven higher by declining inflation, the progress of artificial intelligence (AI), and the Fed's long-awaited decision to begin its interest rate reduction campaign. These factors combined to create an environment conducive to the continued rise of the stock market.

The S&P 500 just had its best January-September performance since 1997, and has now entered the third year of its current bull market run, something that hasn't happened since 2011. And if history is any indication, the current rally still has a lot going for it. Beyond that.

A bull can travel a long distance

Coming out of the worst bear market since 2009, investors are enjoying the good times — and they should. History shows that bull markets have more endurance and tend to persist a lot Longer than their bearish counterparts.

Since World War II, the average bull market has lasted about four and a half years, according to data compiled by Bespoke Investment Group. For context, this is much longer than the average bear market, which lasts about a year.

However, not all bull markets are created equal. 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. On the other end of the spectrum, the bull market that began in 2001 lasted only three months.

The current rally has just completed its second full year, so – if history is correct – this bull market still has more work to do. Of the 13 bull markets that have occurred over the past 77 years, seven have lasted three or more years, so history is on the side of the bulls.

Then there is the issue of returns. Emerging markets have returned 152% on average, which bodes well for existing 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 market that began in 2009 returned 400%. However, the short-lived rally of 2001 – which lasted only three months – only gained 21%.

In general, the longer the bull market, the greater the potential returns. This applies to continuous operation as well. If we look to October 2022 – the beginning of the current market rally – the S&P 500 has returned 63%. If history is correct, the current bull market has a lot to give.

Data by YCharts.

Where do we go from here?

There are a lot of opinions about the market and where we go from here. Goldman Sachs David Kostin, chief US equity strategist, has boosted his year-end 2024 target for the S&P 500 to 6,000 while raising his 2025 target to 6,300. This suggests that after posting a 22% gain already this year, the index is poised for an additional 3% gain. . It also indicates that the S&P 500 will rise 5% in 2025.

While market forecasters will offer their best guesses about what will happen next, the truth is that no one knows for sure. If the economy continues to move, and business and consumer spending continues, the current bull market has a chance to join some of the longest bull markets in history.

However, things don't always go as planned. Investors should be aware of the possibility of a “black swan” event, a seemingly random, unexpected event that can have a massive 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 hide 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 they have lost in the corrections themselves.” This knowledge should help investors mentally prepare for unpredictable events.

The biggest takeaway from this exercise is that time is the biggest advantage investors have. As shown in the chart above, the stock market has delivered strong returns over time despite the market decline. Buying high-quality stocks and holding them for the long term is the best strategy for thriving in a bull market. Furthermore, continuing to add to your portfolio at regular intervals—a process known as dollar-cost averaging—and maintaining it through bull and bear markets helps develop the discipline necessary to thrive no matter the circumstances.

The stock market has returned 10% annually, on average, over the past 50 years, which helps illustrate the benefits of long-term investing.