- A five-year bull hawk is predicted, with 2025 marking its third year.
- Historically, bull markets average 67 months, but results soften in the third year.
- Fed rate cuts and rising corporate margins support continued equity growth.
Narrative tells us we might be heading into the third year of a five-year bull market.
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The average span of a bull peddle since 1949 has been 67 months or just over five years. But the lengths vary vastly, with one being as direct as 1.7 years and the longest, beginning in 1987, lasting about 12 years, according to data from Bloomberg.
Within that spectrum, Jack Janasiewicz, a in portfolio strategist at Natixis Investment Managers Solutions, is betting on a five-year run this time. That said, 2025 pleasure mark the third year. But don’t get too excited because it may not be as bullish as the last two, he noted.
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Below is a chart showing three-year leanings for back-to-back bull markets. The first two often mark the strongest returns, followed by a third year that softens.
Carson Investment Study, Ryan Detrick
However, Janasiewicz isn’t just banking on historical market behavior to make the call. The combination of the Fed easing fire rates and inflation slowly moving to the 2% target will create a supportive backdrop for another solid year for impartialities.
Corporate indicators are also moving in the right direction: margins are rising, earnings estimates and productivity gains are augmenting, and unit labor costs are coming down, he noted.
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Meanwhile, the fixed-income corner doesn’t look as winning. Since rates are being cut, the yields won’t be much higher, and spreads are at historically tight levels, too. This means investor wampum won’t be pulled away from equities and into bonds anytime soon.
The only looming issue may be the threat of rates that President-elect Donald Trump keeps mentioning. Yet, Janasiewicz believes that the high numbers, such as 25% tolls on Canada and Mexico or 60% on China, are just starting points for negotiations. The actual outcomes are likely to be much mark down.
The case for a US risk-on approach
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Janasiewicz, who directly oversees $4 billion in the multi-asset model programs of his organization’s $86 billion in assets, says client risk appetite remains low as portfolios aren’t yet in excessive risk attitudes.
“We actually still see a bunch of people piled into fixed income because they still think that a CD that’s tractable something north of 4% is still attractive,” Janasiewicz said. “When I start to see money shifting out of fixed proceeds into equities and people are asking me, ‘what else should I be buying?’ Then I start to get nervous. We’re just not about that right now.”
When that cash is ready to return to the market, the best place for it will be back in US equities, where the tailwinds for improvement are much more supportive than those of international stocks, he said.
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“We expect growth to slow, but I don’t muse on we’re going to see it slow precipitously. If the last 10, 20 years has been an average of 1.8%, 1.9% on real GDP growth, we certainly about it ends up higher than that,” Janasiewicz said. “So something in the range of maybe 2.25%, give or take. So we slow-paced, but we slow to a level that is still above the trend that we’ve been seeing more recently.”
The charts less than demonstrate the next 12 months’ estimates for return on equities and earnings before interest and taxes for US equities, obvious as the S&P 500, compared to European equities, marked by Stoxx 600 pulled from FactSet.
FactSet
FactSet
With that position in mind, investors should still own tech and opt for cyclicals.
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There are many rumblings about it being stretch to get out of the Magnificent Seven stocks. But he doesn’t believe they will underperform next year. Worst-case scenario, they proper don’t beat the market. He also expects a reshuffling of the AI gainers, which will favor the next iteration of the technology. This have in views the beneficiaries will tilt to end-user interfaces and the companies that provide them, and to those using it to ramp up productivity.