S&P 500 bull market turns four years old and history points to more rise

The current bull market of the S&P 500 turns four on Monday. Since the low of 12 October 2022, the index has risen about 119 percent and several new all-time highs have been reached.

Historically, that's an interesting milestone. According to data from Yardeni Research, there have been six previous bull markets that lasted at least four years. All six then went up even further.

The shortest follow-up period came after the 1957 bull market. It lasted for about seven weeks after the fourth anniversary. Other bull markets continued much longer.

The rally that started in 2009 lasted almost eleven years. The bull market since 1987 even more than twelve years. After the fourth year, the market continued to run very strongly in some cases.

The bull market from 1987 onwards quadrupled roughly after that point, while that of 2009 more than doubled. The weaker examples also went up first. The 1957 and 2002 bull markets still rose about 7 and 16 percent after their fourth anniversary before reaching the top.

History also has a less comfortable side. Four of the six previous bull markets were followed by a bear market that pushed the S&P 500 below its fourth-anniversary level.

For example, those who joined in October 2006 were close to the top about a year later. During the financial crisis, the index was almost 50 percent lower.

Valuations are not cheap even now. The S&P 500 trades around 26 times the profit of the past twelve months. That is above the ten-year average of about 23.6.

However, based on the expected earnings for the next twelve months, the valuation is closer to the historical average.

That makes the conclusion nuanced. The fact that the bull market is turning four years old is not a sell signal in itself. Historically, previous bull markets continued after this milestone.

But age alone does not make a market safe. Ultimately, earnings growth, interest rates and valuations remain much more important than the calendar.