Why one market vet sees stocks gaining another 26% through 2026 in a 'long-term bull market' (2024)

FAQs

What is the stock market outlook for 2026? ›

The AI-fueled stock market bubble will burst in 2026, according to Capital Economics. The research firm said rising interest rates and higher inflation will weigh down equity valuations. "We suspect that the bubble will ultimately burst beyond the end of next year, causing a correction in valuations."

In a bull market, there is strong demand and weak supply for securities. In other words, many investors wish to buy securities, but few are willing to sell them. As a result, share prices will rise as investors compete to obtain available equity.

"Bull market" is the term used to describe a financial market in which prices are rising or are expected to rise. It is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies, and commodities.

The stock market goes up because businesses get bigger and earn more money over time. If you own stocks, you get to take part in that growth. You benefit from the profits, cash flows, innovation, and growth of corporations.

The S&P 500 generated an impressive 26.29% total return in 2023, rebounding from an 18.11% setback in 2022. Heading into 2024, investors are optimistic the same macroeconomic tailwinds that fueled the stock market's 2023 rally will propel the S&P 500 to new all-time highs in 2024.

Bottom line: A big start to a year is not a reason to become bearish. In fact, historically it signals additional strength. The current bull market started in October 2022, which means it is now just less than 19 months old. If it ended now, it would be the shortest bull market ever.

The S&P 500 soared throughout the year and finally reached a new high in January 2024, making the new bull market official. The onset of a new bull market has historically been a very reliable stock market indicator.

Is a bull market good or bad? A bull market is generally a good thing because it can indicate economic growth and optimism among business and consumers.

Growth stocks in bull markets tend to perform well, while value stocks are usually better buys in bear markets. Value stocks are generally less popular in bull markets based on the perception that, when the economy is growing, "undervalued" stocks must be cheap for a reason.

Stock Market Average Yearly Return for the Last 20 Years

The historical average yearly return of the S&P 500 is 9.88% over the last 20 years, as of the end of April 2024. This assumes dividends are reinvested. Adjusted for inflation, the 20-year average stock market return (including dividends) is 7.13%.

Is it better to invest long-term or short term? ›

Potentially less risk

With a short-term outlook, there is often the temptation to pull money out at the first sign of trouble, taking the hit, but not taking the time to recover. A long-term outlook offers the potential for a calmer experience and a stronger investment return.

While there could be a growth slowdown in the first half of 2024, experts believe growth should resume in the second half of the year. Americans faced many financial challenges this year, from persistent inflation to increasingly expensive debt.

BlackRock. Highlights: 5.2% 10-year expected nominal return for U.S. large-cap equities; 9.9% for European equities; 9.1% for emerging-markets equities; 5.0% for U.S. aggregate bonds (as of September 2023). All return assumptions are nominal (non-inflation-adjusted).

Dow Jones Forecast 2026-2030

These five years would bring an increase: Dow Jones value would move from 45,938 to 56,423, which is up 23%. Dow Jones will start 2026 at 45,938, then soar to 46,512 within the first six months of the year and finish 2026 at 46,998.

Analysts expect S&P 500 profits to jump 8% in 2024 and 14% in 2025 after subdued growth last year.

Unlike the rapidly dwindling balance in your brokerage account, cash will still be in your pocket or in your bank account in the morning. However, while moving to cash might feel good mentally and help you avoid short-term stock market volatility, it is unlikely to be a wise move over the long term.