S&P 500: Bulls Likely to Dominate as Long-Term Target of 6,000 Draws Near

In recent discussions, many have made bold predictions about the future of the S&P 500, such as:

“We might see it hit 10,000 by 2028, or maybe even 2027.”

“Nothing seems capable of bringing down the stock market now. Even a recession on the scale of 2008 wouldn’t have a significant impact. In fact, it might even be bullish since the Fed would likely inject trillions into the market again.”

“I’ve been predicting SPY 6000 by the 2024 Santa Claus rally, 7500 by the end of 2025, and a 20% rise every year after due to fiscal debt and quantitative easing reaching unimaginable levels.”

And perhaps the most striking comment:

“It doesn’t matter if they cut rates by 25 bps, 50 bps, or even 75 bps. No matter what, stocks will rally. Even if they don’t cut rates at all, we’ll still rally. There’s no stopping it, not even God.”

If people truly believe not even divine intervention can halt this market, who am I to disagree?

Now, with the Fed appearing to be on a path toward lowering rates, bullish sentiment is gaining even more traction. One might wonder, is there any force more powerful than the Fed that could stop this momentum?

It seems many now view the Federal Reserve as holding more sway over the market than any other force.

But does this mean we’ve reached the peak? Not quite yet. Long-time readers of my analysis will recall that I set a long-term target for the S&P 500 years ago at 5,350-6,000 SPX. Based on the current structure, it seems we may even surpass that target.

Does that imply the market will keep rising indefinitely? Absolutely not. I see this as the final wave of a multi-decade bull run, as I’ve outlined in previous articles. I was initially uncertain whether the market had one more extension left before the long-term structure completed, but the actions seen on September 11th this year suggest we may have another leg up before a significant top is reached.

However, the more optimistic the public becomes, the less likely they are to see the risks lurking beneath the surface. While reading through various comments, I stumbled upon this insightful exchange:

“I recently researched the 2008-09 financial crisis. In September 2007, the Fed started cutting rates aggressively, starting with a 0.5% reduction. Over the next year, they slashed rates by a total of 2.75%. How did the market respond? From its peak in October 2007 to March 2009, the S&P 500 dropped about 57%. The Consumer Staples sector fared the best, falling only 28%.”

This observation is factually accurate and quite compelling. However, the response to it caught my attention even more:

“But is the 2008 crisis really the right comparison for today? Back then, too many risky mortgages were given out, and Wall Street built a mountain of derivatives on top of those weak foundations, which were then sold globally. Where’s the equivalent risk today?”

As a simple market analyst, I can’t predict what the media will blame for the next bear market, but I can confidently say there will be another financial crisis, potentially worse than what we saw in 2008-2009. Comments like this reflect a lack of understanding about just how fragile the banking system is today.

In 2008, one primary factor led to the banking crisis. Now, five major risks loom on bank balance sheets, any of which could trigger an even more severe crisis. These include commercial real estate issues, rising consumer debt approaching 2007 levels, underwater long-term securities, over-the-counter derivatives, and risky shadow banking practices.

So, when someone asks if the 2008 crisis is the right analogy, the answer is both yes and no. While we’re unlikely to see another collapse triggered by mortgage-backed securities, today’s financial system is rife with different risks that could implode. If just two or three of these factors unravel simultaneously, the financial collapse could be catastrophic.

Another point that bears striking similarity to the Great Depression is the widespread belief that “not even God can stop this market.”

Consider these quotes from the past:

“We will not have any more crashes in our time,” said John Maynard Keynes in 1927, two years before the stock market collapse that led to the Great Depression.

“Stock prices have reached what looks like a permanently high plateau,” remarked Yale economist Irving Fisher just weeks before the crash in October 1929.

And in January 1928, New York Stock Exchange President E.H.H. Simmons confidently declared, “I cannot help but raise a dissenting voice to those who say we are living in a fool’s paradise.”

The belief that markets are unstoppable is not new—and it rarely ends well.

While I don’t have solid evidence that the market has peaked just yet, I expect this rally to conclude in 2024, with a possible long-term downturn beginning shortly afterward. However, before I aggressively trade the coming bear market, I’ll be looking for strong confirmation as we move into 2025.

In the meantime, I expect confidence in this bull market to reach even more extreme levels. When the top finally arrives, it’s likely that very few will see it coming. But for those familiar with non-linear analysis, it’s clear that the continuation of this bull trend is impossible in a non-linear system like the stock market.

As George Santayana wisely noted:

“Those who cannot remember the past are condemned to repeat it.”

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