The cyclical bull rally that began in October 2022 is expected to continue into 2025, according to a recent report from Ned Davis Research. The firm’s analysis of historical trends in cyclical bull market rallies suggests that the current rally could last well into the summer of 2025, and potentially even longer.
Despite a recent correction in the stock market, with the Nasdaq 100 falling nearly 10% from its peak in July, Ned Davis Research remains optimistic about the long-term outlook for equities. The firm points to a combination of factors, including a global soft landing, accommodative monetary policies, solid valuations, and subdued investor sentiment, as reasons to remain overweight equities.
Ned Davis Research recommends a maximum overweight target of 70% in equities for a balanced portfolio, with the remaining 30% allocated to bonds and cash. The firm believes that the risks of a new bear market are low, and that the recent correction is a normal part of the seasonal weakness typically seen during the summer months.
To monitor the health of the bull rally, investors are advised to closely watch earnings results. Ned Davis Research notes that US companies have been consistently beating analyst profit estimates, with the beat rate exceeding 75% for five consecutive quarters. If this momentum starts to decline, it could be a warning sign for the market.
Overall, Ned Davis Research is confident that the recent correction will give way to another leg higher in the ongoing bull market. The firm’s analysis suggests that the current rally has the potential to last for several more years, providing a buying opportunity for investors.
