Stock markets are up about 20% this year so far, but the rally could be part of a larger global bull run that could send the S&P500 to 14,000 by 2034.
Robert Slummer, strategist at RBC, said in a recent note that the bullish trend that began in 2016 could be on its way to resurfacing in stock markets.
He added, “The long-term trend of US financial markets remains positive, with a basic cycle of 16 to 18 years supporting further rise until the mid-2000s, and the S&P may reach 14,000 points” by 2034.
Slummer forecasts an upside potential of 209% from current levels, or an average annual return of just over 10% over the next 11 years.
According to Slummer, these “generational cycles” have had periods of expansion and contraction that last for nearly two decades.
“If the past is a precursor to the future, the current global uptrend could continue into the early or mid-2000s,” he said, adding that the last quarter of 2022 is like the bottom of the previous cycle.
Slummer has studied a long-term chart of the S&P 500 since the Great Depression of 1929. Since then, there have been only two series of global rally, one during the 1950s and 1960s, and the other during the 1980s and 1990s… both of which yielded total returns of approximately 2,300%.
“If the current cycle produces a similar rally of 2,000% or more, the S&P could move towards 14,000 points by 2034, which is the year we expect the current global bull cycle to peak in 16-18 years,” Slummer believes.
In contrast to those periods of expansion there were periods of contraction, and between them stocks moved mostly casually over nearly two decades. The last two market downturns occurred between the mid-1960s through the early 1980s, and from the late 1990s until around 2014.
Between now and 2034, Slummer argues, long-term investors should tend to be optimistic, seeing sell-offs in stock markets as opportunities to increase exposure to global growth and the economic cycle, including industries.
“We expect volatility to pick up during the earnings season until late in the third quarter, which is when seasonal weakness often crystallizes,” he said in the conclusion.
He recommends that long-term investors stay on track and remain optimistic about the changing market cycle that bottomed out last quarter.”
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