If history is any guide, the S & P 500 could climb to 4,900 by next summer, Bank of America says. The broader market index entered a cyclical bull market after rising 20% off its October low on June 8, the firm’s technical strategist Stephen Suttmeier said Friday. Investors piled into the benchmark after its climb above 4,200 set off what the strategist called a “FOMO (fear of missing out) rally.” “The S & P 500 (SPX) has climbed a wall of worry as many key market indicators have flashed bullish backdrop signals throughout 1H 2023,” Suttmeier said in a note to clients. “The move on the SPX above 4200 has triggered a FOMO (fear of missing out) rally (see report: FOMO on SPX push above 4200), which has taken the SPX into cyclical bull market territory on a 20% rally off the October 2022 low,” he added. Many investors do not consider it the end of a true bear market until the S & P 500 reaches a new high. The all-time closing high for the broader benchmark is 4,796.56. The S & P 500 closed Friday at 4,298.86 and breached the 4,300 level during trading on Monday. However, history suggests these cyclical bull markets could continue for some time. Since 1929, these cycles have lasted 33.6 months on average, and 17.4 months on a median basis. On an average basis, that has meant gains of 114.4%; on a median basis, 76.7%. Meanwhile, one year after the S & P 500 entered a bull market, the index was higher a majority of the time. On an average basis, the index gained 9.4%, and on a median basis, 14.1%. For investors, that could mean the S & P 500 could rally as high as 4,900 by next summer, the strategist said. “The year after the SPX enters a cyclical bull market shows the SPX higher 65% of the time on an average return of 9.4% and a median return of 14.1%, which equates to SPX 4700 and SPX 4900, respectively, into June 2024,” he added. However, the strategist expects there could be some resistance ahead. While the outlook for the S & P 500 is positive above the 4,200-4,166 range, the strategist expects a key test for the index somewhere above the 4,300 level. “The SPX is bullish above 4200-4166 with its upside breakout from a February into June cup and handle pattern intact,” he wrote. “This pattern does not rule out upside into the 4500s (pattern count at 4580), but the SPX tests a resistance at 4311-4325 (61.8% retracement of the 2022 cyclical bear market and the August 2022 peak).”
The history of cyclical bull markets suggests the S&P 500 could rise to 4,900 by next summer