A Bull Market is Here. History Says This Could Happen Next. | The Motley Fool (2024)

The S&P 500 (^GSPC 0.54%) climbed last year, but one big uncertainty remained: Was this a temporary rebound or were we experiencing the early days of a new bull market? To confirm a bull market, an index must hit a new record high, and that hadn't yet happened.

But the early days of 2024 swept away this uncertainty as the S&P 500 reached its highest level ever, signaling we've been in bull territory for quite a while -- since the index started rebounding from its bear market low in late 2022. This is fantastic news, but now you might be wondering about what to expect from the market in the coming months or years. And that's where we can glance back in time and find out what history suggests could happen next.

Bull markets have lasted longer than bear markets

The market has experienced four bull markets since the mid-1970s, and they've all lasted longer than bear markets during that time period, spanning more than 8 years compared to 1.4 years for bear markets. This is according to data compiled by Raymond James & Associates. So, the idea that bull markets stick around longer than bear markets already is pretty good news.

Now here's the part about what may happen next. The data also show that these past bull markets resulted in triple-digit gains for the S&P 500 and double-digit annualized returns for the index. Since the start of the new bull market, the index has climbed about 38% and has advanced only about 4% so far this year. So, if the S&P follows the annualized and total return trends of the past, it has plenty of room to run in 2024 and beyond -- and may deliver a double-digit increase this year and a triple-digit one by the end of the bull market.

That's terrific, but it's important to note that just because the market performed in a certain way during past bull markets doesn't guarantee it will do the same this time around. So, why should we look at past trends? Because a pattern that repeated itself often enough allows us to prepare for an outcome that could happen again. And if it doesn't, we'll be prepared too because, as always, it's best to build your portfolio for long-term performance rather than gains just during one particular market phase.

Here's how to do it. First, to benefit from the current environment -- in this case a bull market -- you could adjust a few elements that may boost performance. But do this without overhauling your entire portfolio. For example, if you're a cautious investor don't sell off your safe and steady pharmaceutical players or your dividend stocks -- but you might want to add a few more growth stocks to the mix. If you're an aggressive investor who already favors growth stocks, you may want to look for bargains among growth players and load up.

Growth stocks could offer your portfolio a lift

Growth stocks generally thrive in bull markets or times of economic expansion and recovery, so they could offer you an extra lift in this kind of investing environment. We saw this last year, as gains in stocks like e-commerce giant Amazon, chip powerhouse Nvidia, and Google parent Alphabet (GOOG 1.82%) (GOOGL 1.79%) led indexes higher.

And some of these growth stocks still remain fantastic buys. Alphabet trades for only 21x forward earnings estimates which looks dirt cheap considering the company's earnings strength and the fact that analysts expect double-digit annual growth from Alphabet over the next five years. The company's investments in artificial intelligence (AI) are set to improve its biggest moneymaker, Google Search -- and that should boost advertisers' spending on the platform and lead to more earnings growth over time.

Of course, as you make some adjustments to your portfolio, remember to think long term by investing in quality companies with great prospects. Whether they gain during this bull market or not, they should help you win over time.

Finally, as mentioned above, no one can guarantee what the market will do next. But history offers us some clues about what might happen, and if history is right, the S&P 500 may have a lot farther to go in this new bull market.