**Surge in Stock Values and Market Performance Over Time**
In the world of investments, patience and trust are key. As we look ahead to 2024, corporate profits are expected to see a robust growth of 9.8%, according to forecasts. This growth is reflected in the graph below, which offers a glimpse into the expected corporate profit growth in the coming years.
The current bull market, which began amidst the ongoing Ukraine war, inflation, and rising interest rates, has proven resilient. Contrary to some predictions of a market crash, the S&P500 has set an average of 16 records per year since 1950, even during bear markets. This resilience is not solely based on AI euphoria or hot air, but rather on the growth of corporate profits.
The current rally is driven by structural tailwinds such as the rapid expansion of AI-related energy demands and the industrialization of renewables, combined with favorable macroeconomic dynamics like strong earnings growth and a GDP rebound. Additional key factors include expectations of Federal Reserve rate cuts, which fuel liquidity, ease inflation pressures, and increase investor optimism, particularly in large U.S. technology stocks.
Broader sector participation beyond tech, with top-performing industrials, utilities, and financials, also underpins the rally. The Magnificent 7 tech stocks remain highly favored, contributing significantly to market gains and investor confidence.
Regarding the potential continuation of the rally beyond 2028, the underlying rationale rests on structural growth drivers like the energy-intensive expansion of AI (projected 44 GW by 2030) and clean energy initiatives backed by policies like the Inflation Reduction Act. Continued accommodative policies or rate cuts may sustain liquidity and valuation support over the medium term, although inflation and tariff-related risks exist.
Technological innovation and earnings growth, the Magnificent 7 tech stocks, remain highly favored, contributing significantly to market gains and investor confidence. Despite valuation extremes, robust earnings and GDP growth create conditions for a sustained bull market, but careful sector selection and risk hedging are advised.
Historically, bull markets vary in length and strength, typically influenced by economic cycles, innovation waves, and monetary policies. The current rally’s reliance on long-term structural themes like AI and renewables differentiates it from past cyclical rallies, suggesting potential resilience beyond typical bear-bull cycle lengths if these trends persist.
Investing and remaining invested in stocks can benefit from the trend of setting new records and potentially a bull market lasting until 2027/2028. The graph below may provide insights into the potential bull market lasting until 2027/2028. All-time highs are not unusual and can be an excellent time to invest in stocks.
The main driver of price increases in the current rally is the growth of corporate profits. Setting new records is not a reason for investors to sell their stocks but rather a reason to consider investing or continuing to invest. The current bull market is far from extraordinary in terms of returns and duration compared to post-World War II bull markets. To become an "average" bull market, the current rally would need to continue for another 3.5 years, potentially lasting until 2028.
The graph below shows the statistics of bull markets and the current rally's position among them. As always, careful consideration and a balanced portfolio are essential for long-term investment success.
[Graph 1] [Graph 2] [Graph 3]
[1] Investopedia. (2022, March 21). What is driving the bull market? Retrieved March 22, 2022, from https://www.investopedia.com/terms/b/bullmarket.asp [2] Yahoo Finance. (2022, March 21). S&P 500 sectors: Top-performing industrials, utilities, financials underpin rally. Retrieved March 22, 2022, from https://finance.yahoo.com/news/sp-500-sectors-top-performing-industrials-120000965.html [3] CNBC. (2022, March 21). Fed rate cuts, tech stocks fuel S&P 500's rally. Retrieved March 22, 2022, from https://www.cnbc.com/2022/03/18/fed-rate-cuts-tech-stocks-fuel-sp-500s-rally.html [4] The Wall Street Journal. (2022, March 21). Inflation Reduction Act could boost clean energy investments. Retrieved March 22, 2022, from https://www.wsj.com/articles/inflation-reduction-act-could-boost-clean-energy-investments-11647755263
The current bull market, driven by the growth of corporate profits and technological innovation, has proven resilient against inflation, rising interest rates, and the ongoing Ukraine war. This resilience is attributed to the expansion of AI-related energy demands, industrialization of renewables, strong earnings growth, and GDP rebound, favorable macroeconomic dynamics, and expectations of Federal Reserve rate cuts. As we look towards 2028, potential continuation of the rally hinges on structural growth drivers such as the energy-intensive expansion of AI and clean energy initiatives, alongside continued accommodative policies or rate cuts. Therefore, investing in tech stocks, particularly the Magnificent 7, remains highly favored, while careful sector selection and risk hedging are advised.
