Evercore Sees US Stocks Just Getting Started on Bull Run

The U.S. stock market, particularly the S&P 500 (^GSPC), is poised for continued growth into the next year, driven by a combination of political shifts, historical market trends, and seasonal market behaviors. Evercore ISI strategists have expressed a bullish outlook, influenced significantly by the recent presidential election where Donald Trump’s victory promises a policy environment conducive to business growth.

According to Julian Emanuel of Evercore ISI, the current bull market is still in its early stages. Emanuel points out that over the last century, bull markets have typically seen the S&P 500 rise by an average of 152% over 50 months. Since its last low point in October 2022, the index has already climbed by 65%, a surge largely fueled by technology sector leaders.

Emanuel’s optimism is based on the policy changes anticipated under Trump’s administration, particularly the reduction of regulatory burdens, which he predicts will propel the S&P 500 to reach 6,600 points by June 2025, an additional 11% increase from current levels.

Trump’s economic agenda, focusing on less regulation and lower corporate taxes, is expected to enhance corporate earnings, thereby uplifting stock valuations. Despite these valuations being considered high by some standards, Emanuel argues that markets often continue to expand beyond what might initially be deemed ‘expensive’, drawing on historical precedents where extended bull runs have occurred.

The S&P 500’s recent record highs post-election reflect investor confidence in these policy shifts. Additionally, the Russell 2000 Index (^RUT), which tracks small-cap companies, has seen a significant rise to a three-year high, buoyed by expectations that smaller companies might disproportionately benefit from Trump’s more protectionist economic policies.

Beyond policy expectations, seasonal trends provide another layer of optimism. Historical data from Bloomberg indicates that the S&P 500 has typically seen an average gain of 4.1% during the fourth quarter over the past two decades, suggesting that the end of the year could bring further gains.

Interestingly, even traditionally bearish voices like Michael Wilson from Morgan Stanley (MS), who was notably pessimistic about U.S. stocks in the previous year, have shifted their stance. Wilson now anticipates that the market could maintain its upward trajectory into the year’s final stretch. This change in perspective might reflect a broader reevaluation of market conditions given the new political landscape and economic policies.

The collective outlook from these financial strategists suggests that while there might be volatility or short-term corrections, the overarching trend for U.S. stocks, particularly the S&P 500 – last trading above the 5,961 level – is bullish. Investors are betting not just on the immediate policy changes but on the broader economic environment that these changes are expected to foster, potentially leading to a prolonged period of market growth.

Reference : Bloomberg

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