10 in 10
Dr. Bryan Taylor, Chief Economist, Global Financial Data
The S&P 500 just closed above 5000 for the first time in history.
It was 1968 when the S&P 500 first closed above 100; 1995 when it hit 500; 1998 when it hit 1000; 2014 when it hit 2000; and in 2024 the S&P 500 reached its newest milestone of 5000.
When will the S&P 500 hit 10,000?
10 in 10
As indicated by the long-term data, should the trend continue, the 10,000 milestone will be reached in 10 years. 10 in 10.
The stock market is in the middle of the Third Great Secular Bull Market since 1900. The S&P Composite made no progress between 1901 and 1942; in fact, in 1942 the benchmark closed below the levels of 1901 – retracing its entire upward movement in the 1920s as referenced in Figure 1. However, this bottom cleared the path for the S&P 500 to achieve average returns of 7% or more.
The S&P Composite rose by 1350% between 1942 and its high in 1968. The stock market stagnated until 1982 when the second secular bull market commenced. Then it rose 1390% between
1982 and 2000. The stock market stagnated for the next nine years until the Third Great Secular Bull Market began in 2009.
The S&P 500 hit a low on March 9, 2009, at 676.53, a level it had visited in May 1996. Since then, the S&P 500 has risen to 5026 in February 2024, increasing by 643%. If the S&P 500 were to rise
by 1390% from its bottom in 2009, it would reach 10,080. We believe that over the next ten years, the S&P 500 can rise to at least 10,000.
Using annual returns, the Composite has risen at an annual rate of 14.3% since 2009. During the past 90 years, the S&P 500 has increased in price by 7.14% per annum, and if the S&P 500 can maintain that rate of growth over the next ten years, it will reach 10,000 in 2034.
Many people invest in S&P 500 ETFs and Mutual Funds. They receive reinvested dividends that add to their total return. The current dividend yield is about 1.6%. The S&P 500 Return Index broke through 10,000 in December 2023, and if the S&P 500 continues to pay a 1.6% dividend over the next ten years, the Total Return Index will hit 25,000 in 2034. 25 in 10.
Figure 1. S&P Composite Price and Total Return Index, 1900 to 2024
Hiccups in the Rally
Currently the S&P 500 is at a very high valuation. The trailing P/E ratio on the S&P 500 is 26.5 and its CAPE Ratio is 34.5. Both are above historic averages. The stock market capitalization is about 175% of GDP. Moreover, there are concerns about the level of government debt in the United States, elections in 2024, wars in Ukraine and the Middle East, inflation, higher interest rates, growing protectionism in the United States, the possibility of trade wars, and other problems that could stifle the current bull market.
Will We Bull On?
Will the current bull market continue for another 10 years? The 1942 bull market peaked in 1968, then hit a final high in 1973, lasting 31 years. The 1982 bull market lasted 18 years, so a 25-year bull market that lasts until 2034 can occur, and we believe that it will. Enjoy life and keep investing in the final stretch of the Third Great Secular Bull Market.
