Bull Market Optimism Persists Amid Historical Trends and Economic Growth

As the bull market enters its third year, the Sevens Report remains optimistic despite concerns over stretched valuations and geopolitical risks. The report cites factors such as robust economic growth, pro-growth policies from the U.S. government, expected rate cuts, and $7 trillion in sidelined cash ready for investment.

Historical data supports this outlook. According to Sevens, since 1950, the S&P 500 has delivered back-to-back 20% returns eight times (excluding 2023 and 2024). In six of those instances, the following year saw an average gain of 12.3%, indicating a favorable trend for continued growth after strong market performance.

Further historical analysis reveals that in the last three instances of consecutive 25% annual gains for the S&P 500, the index remained positive in two out of three cases the following year. This pattern underscores the potential for market strength even after substantial advances.

The report also highlights the benefits of investing at market highs. In 2024, the S&P 500 reached 57 all-time highs, demonstrating resilience. Additionally, following the first rate cut in a Fed easing cycle, the S&P 500 has historically delivered average gains of 5.5% over 12 months, often doubling in the absence of a recession.

While acknowledging that another 20%-25% surge is unlikely, Sevens notes the potential for "decent gains" in 2025. The firm concludes that historical trends and supportive economic factors favor continued positive market performance, even after consecutive years of significant returns.