Pullback just temporary? Research firm: U.S. stock market bull run to continue until 2025

According to the historical trends emphasized by Ned Davis Research, the cyclical bull market rebound in the U.S. stock market that began in October 2022 is expected to continue until 2025.

The research firm released a report last week, with a chart illustrating the situation of cyclical rebounds in the early stages of a long-term bull market, which is exactly the nature of the current rebound.

Ned Davis Research found that, based on the starting date of the stock market hitting bottom in October 2022, on average, this bull market should last until the summer of 2025.

If the cyclical bull market from 2011 to 2015 repeats, this bull market may last until 2026; and if it repeats the technology-driven cyclical bull market from 1990 to 1998, then this bull market may last until 2030.

Ned Davis Research's bullish view was published as the stock market experienced a slight pullback, with the Nasdaq 100 Index falling nearly 10% from its recent peak in July. However, the firm believes that this is just a short-term decline and does not signal the end of the bull market rebound.

Ned Davis Research stated, "Evidence of a global economic soft landing and the prospect of loose monetary policy continue to favor the long-term performance of stocks. We expect to remain overweight on stocks, and adjustments will bring buying opportunities."

The firm currently recommends a maximum target allocation of 70% for stocks in a balanced investment portfolio, with the remaining 25% and 5% allocated to bonds and cash, respectively.

Ned Davis Research stated that the risk of the U.S. stock market entering a bear market remains low, and given the seasonal weakness in the summer, the current market correction is completely normal. Robust valuations, subdued investor sentiment, a favorable macro environment, and continuously declining bond yields mean "there is ample evidence that a long-term bull market still exists."

To monitor the health of the current stock market bull market rebound, the firm advises investors to closely watch earnings results.

In the report, Ned Davis Research mentioned that U.S. companies have exceeded analyst profit growth expectations by over 75% for five consecutive quarters, and the results for the second quarter indicate that this trend will continue for a sixth consecutive quarter.

However, a slowdown in profit growth would be a warning signal. Ned Davis Research stated:

"If profits start to decline and the momentum turns negative, increasing disappointment could trigger more selling. Conversely, if expected profits remain high as the earnings season progresses, the chances of a market recovery will increase."

The firm concluded that ultimately, the recent correction "should set the stage for the ongoing bull market to move up another level."