The S&P 500 just did so for the first time in 27 years. Here’s what history says is happening next.

The S&P 500 (^GSPC 0.90%) is the most watched benchmark of the US stock market, comprising the 500 largest companies in the country. Due to its broad base of constituent companies, it is considered to be the most reliable indicator of overall stock market performance.

The index has been firmly in rally mode since the start of last year, driven by the artificial intelligence (AI) boom, an improving economy and, most recently, the decision by the Federal Reserve Bank to begin its long-awaited campaign of rate cuts interest. These factors represent a trifecta of factors that will propel the ongoing stock market rally.

In fact, the S&P 500 just posted its best January through September returns since 1997. History suggests there’s more to come.

Image source: Getty Images.

Strong momentum

The first three quarters of 2024 were profitable for investors. History suggests that market gains are likely to continue.

We are currently in the throes of a bull market that began on October 12, 2022. While no two bull markets are alike, existing data helps provide context. The average bull market lasts 1,866 days – or just over five years. The market hit a low nearly two years ago, suggesting the current bull has room to run.

Furthermore, since its low point, the S&P 500 has gained about 59%, compared to the average bull market gains of 180%. These data seem to suggest that we are still in very the early stages of the current bull market.

There are more. In the first nine months of 2024, the S&P 500 is up about 21%. History suggests that the momentum that has sustained this rally will continue. The benchmark has posted double-digit gains on 12 separate occasions since 1990. In all but one of those years, the rise continued into the fourth quarter, generating additional gains for investors.

Data from YCharts. YTD = Year to date.

The data presented in the graph above is clear. For the 12 years in which the market generated double-digit growth in the first three quarters of the year, in 11 of those years, the S&P 500 continued to deliver positive returns in the fourth quarter.

While there are no guarantees, the data indicates that there is a 92% chance that the market will continue to rise during the fourth quarter, producing an additional average gain of around 7%.

Does this mean investors will enjoy positive returns during the fourth quarter? No one can say for sure, but given the available evidence, I like those odds.

The jury is still out

So where will the market be by the end of the year? The truth is, no one knows.

In August, some on Wall Street were suggesting the market had already peaked, AI growth was losing steam, and the S&P 500 would end the year at 5,600 — below its current level since then.

Now, just six weeks later, the Federal Reserve has begun its interest rate cut campaign, which has boosted the benchmark higher. The S&P is currently at 5,700 (as of this writing) and continues to gain ground. Wall Street is renewing its patterns, suggesting that the rally is on the way.

Analysts at DataTrek Research believe the S&P 500 will hit 6,000 before the year is out, which is about 5% higher than its current position. Analysts continued to suggest that the S&P 500’s constituent companies will generate earnings per share growth of 15.2% in 2025, outpacing this year’s 10% growth. If this forecast turns out to be correct, next year’s market returns could be even more robust.

Not to be outdone, BMO Capital Markets recently issued the biggest forecast on Wall Street, raising its year-end target for the S&P 500 to 6,100, suggesting the market could climb 7% from current levels .

To be clear, it doesn’t matter what the S&P 500 does in the coming weeks or months. What it is the important thing is that the stock market — if left to its own devices — will eventually move higher, making it the largest and most consistent wealth-generating and compounding tool available. Indeed, the market has returned 10% annually on average over the past 50 years, helping many long-term shareholders find financial security.

As such, investors should buy shares in the best companies they can find and hang on for the ride.