The current round of the bull market in US stocks is officially celebrating its second birthday, and this rise has exceeded everyone's expectations, not just the most bullish Wall Street investors.

Driven by the AI boom, $S&P 500 Index (.SPX.US)$ it has risen more than 60% since hitting a bear market closing low of 3577.03 on October 12, 2022. It is worth noting that on the two-year anniversary of the bull market, the S&P 500 index set a new high for the 45th time this year last Friday, and for the first time in history, it reached the 5800 mark.

Looking at the components, $NVIDIA (NVDA.US)$ one leading stock has soared more than 10 times in two years, $Meta Platforms (META.US)$Please use your Futubull account to access the feature.$Broadcom (AVGO.US)$ Following closely, it has cumulatively increased by more than 3 times. $Netflix (NFLX.US)$ Rising over 230%. $Advanced Micro Devices (AMD.US)$ Rising nearly 200%.

Can the bull market continue?

From a historical perspective of bull markets, this bull market may actually still have momentum.

The current bull market has an average duration of 5.5 years, which is far from the average 5.5-year length of a bull market. According to the research by Ryan Detrick, Chief Market Strategist at Carson Group, the total return rate of this bull market so far is 60%, which is only a small improvement compared to the historical average of 180%.

Ned Davis Research analysts have deeply studied the performance of bull markets at the two-year mark. Data shows that since the end of World War II, there have been 12 bull markets lasting at least two years. Among the most recent 10 bull markets, 7 have been able to continue into the third year, indicating a high probability that the current bull market will persist.

The Ned Davis team believes that as long as the following three conditions are met, the current bull market is likely to enter the third year.

First, the anti-inflation trend that began at the end of 2022 must continue. Since the significant interest rate cut by the Fed in September, concerns about inflation resurfacing have been quietly spreading. If there are specific signs of inflation rising again, it could trigger investor panic.

Secondly, the Federal Reserve must successfully achieve the "But after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.", which means the Federal Reserve must ensure that the US economic growth rate remains positive while letting inflation fall back to the 2% target.

Third, the largest companies in the United States must continue to maintain profit growth. Wall Street currently expects that the profit growth of the tech "big seven" will slow down starting later this year. Other components of the S&P 500 index must take over the rise of the large cap from the "big seven," and forecasts indicate that this is likely to happen.

Currently, Wall Street analysts are generally bullish on the future trend of US stocks, eagerly raising the target price of the S&P 500 index.

Goldman Sachs also raised its year-end target price for the S&P 500 index to 6000 points, and set the target price for the next 12 months at 6300 points. However, Goldman Sachs' chief stock strategist David Kostin also pointed out that the already high valuation may limit the index's upside potential next year.

Piper Sandler's chief investment strategist stated that the currently expensive valuations indicate that the US stock market may be transitioning from a macro-driven environment (stock market rally driven by factors such as declining inflation and other signs of economic resilience) to a more corporate profit fundamental environment. The bank believes that to keep the market moving higher, especially in deciding which stocks will lead next, everything will depend on profits.

Scott Chronert, a stock strategist at Citigroup, believes that this narrative may still be related to two key letters defining the first half of the bull market - AI. The bank believes that in order for AI to continue to have a broader impact on the market and drive index earnings growth beyond expectations, more companies must deliver on the promises of AI in profit margins and earnings indicators. This will be a proposition that needs to be verified in the future, and it may take two to five years.

What should we pay attention to next?

• Focus on corporate profits.

In 2025, the overall sales volume of Oracle is almost no sign that the US stock market is about to peak. The bank's analysts believe that the S&P 500 index is expected to reach 6,000 points in the first half of 2025. The bank also stated that if the current bull market follows historical average levels, US stocks may continue to rise until the end of 2025, with the S&P 500 index expected to rise to around 7,000 points by then.

The chief investment strategist of the Bank of Montreal Capital Markets, Brian Belski, expressed surprise at the continued strength of the market's upward trend, and by the end of the year, the path of least resistance for US stocks is higher. In his report, he raised the year-end target price of the S&P 500 index from the previous 5600 points to 6100 points.

Today's weather is good Today's weather is good.

As the third quarter earnings season approaches, investors will closely monitor the financial reports of giants such as Nvidia, Microsoft, and Google, hoping to find clues as to when these companies' massive investments will pay off.

There is a new situation in the US stock market's Q3 earnings season: Wall Street analysts expect this quarter to be the slowest in performance growth in nearly a year. The expected earnings growth rate for the S&P 500 index will only be 4.3% higher than last year. In the first three quarters of this year, the growth rates were 9.8%, 13.1%, and 11.2% respectively.

This is not entirely a bad thing. Lower expectations may actually provide more room for positive surprises, similar to when the same group of analysts had forecasted a profit growth rate of only 3.8% for the U.S. stock market in the first quarter of this year, which ended up doubling.

• US Presidential Election.

As the 2024 US presidential election officially enters the final sprint stage, the two presidential candidates are still neck and neck, and some investors have started preparing for potential political risks.

Lauren Goodwin, Economist and Chief Market Strategist at New York Life Investments, stated that investors will focus on company executives' views on the escalating Middle East conflict and the US presidential election, both significant variables that could affect the continued broadening of the US stock market rally.

Furthermore, it is worth noting that the US election on November 5th has led many traders to purchase hedging tools to guard against possible volatility that may arise from the election results, especially in the event of disputed outcomes.

• Sector rotation

In addition to earnings season and the US presidential election, investors need to closely monitor sector rotation phenomenon.

Jay Woods, Chief Global Strategist at Freedom Capital Markets, stated that Wall Street often mentions a phrase called "The lifeblood of a bull market lies in rotation", and this seems to be happening. Recently, the market has shifted focus away from speculative large technology stocks to a rotation towards electrical utilities stocks, as these stocks have benefited from the narrative of AI increasing the demand for electricity.

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