Historical Data Suggests Four-Year Stock Market Rally Has More Room to Run

As the current equity bull market approaches its fourth anniversary next week, historical precedents suggest the rally has significant momentum remaining. The S&P 500, which bottomed on October 22, 2022, at 3,577, has gained 117% since then. While some investors may fear the market is showing signs of aging, data indicates that bulls extending past this milestone rarely terminate prematurely.

Keith Lerner, chief investment officer at Truist Advisory Services, noted in a Thursday research note co-authored by investment strategy analyst Jake Reid that five of the six prior bull markets lasting beyond four years delivered further gains in their fifth year. Since the 1950s, the average gain for such extended rallies has been 184%. Lerner emphasized that while pullbacks are typical—averaging a maximum drawdown of 14% in year five—they should be viewed as the cost of participating in long-term appreciation rather than a signal to exit.

“Age alone is not a reason to become defensive,” Lerner said. “Continued economic growth, resilient earnings, more reasonable valuations, and generally favorable seasonal trends and historical precedent suggest the cycle still has further room to run.”

Beyond historical patterns, Truist is analyzing business-cycle dynamics and fundamental indicators. The firm’s economists project U.S. economic growth of 2.2% in 2026 and 2% in 2027, driven by resilient consumer spending and ongoing artificial intelligence investment. Avoiding a recession remains critical to sustaining the bull market, Lerner added.

Valuations have become increasingly supportive of further gains. During the rally’s fourth year, rising earnings—not expanding price-to-earnings multiples—have powered the S&P 500’s advance. The benchmark’s forward P/E has dropped from 23 a year ago to approximately 19 today. Similarly, the technology sector’s P/E multiple has fallen from 32 to 22, a trajectory Lerner contrasted with the speculative excesses of the dot-com bubble.

Technical and seasonal factors also provide tailwinds. Lerner highlighted that the S&P 500’s primary trend remains positive, led by tech sector leadership and AI-related megacap stocks. He expects this leadership to endure, noting that healthy bull markets often reset through sector rotation rather than broad liquidation. However, he acknowledged that broader market participation would strengthen the rally, as markets generally perform better when a wider array of stocks advances.

Despite the optimistic outlook, several risks could truncate the bull market before its fifth birthday. These include further Federal Reserve interest-rate hikes, elevated bond yields, geopolitical tensions, persistently high energy prices, and missed earnings expectations given the currently high bar for surprises. Additionally, concerns about soaring AI capital expenditure and the market’s heavy reliance on the tech sector pose potential threats.

Lerner cautioned that while history is useful, it is not sufficient on its own, quoting Warren Buffett: “If past history was all that is needed to play the game of money, the richest people would be librarians.”

In broader market news, U.S. stock-index futures rose as Treasury yields edged higher. Key asset performances showed the S&P 500 up 1.29% over the last five days, while gold traded around $4,214 an ounce. In corporate developments, Apple shares declined after reports it cut iPhone 18 Pro component orders due to softer demand, and SpaceX’s acquisition of spectrum licenses pressured shares of AT&T, T-Mobile, and Verizon. Meanwhile, Humana stock jumped after the company improved its Medicare Advantage quality ratings.