Stocks are still in the midst of one of the greatest bull markets seen over the last century — and it's flashing a present opportunity for investors to load up on equities, according to Federated Hermes.
That's because stocks are still riding a decade-long secular bull market, the investment manager said. The long-running streak of gains began in 2013, when the S&P 500 had finally recouped its losses from the 2008 recession and notched a new all-time-high.
"Presently, we are in the mid stages of one of the three great secular bull markets of the last 100 years," Federated Hermes chief investment officer Stephen Auth said in a note last week. "Like all bulls, it's had its share of steep 20-35% corrections (in 2018, 2020, and 2022), but never more than that and never for too long," he added.
The intact bull market was confirmed at the start of 2024, when stocks continued to surge and notched a new all-time-high to kick off the year.
Auth also pointed to signs that the outlook on stocks for the coming years is positive. Corporate earnings, for one, appear to have troughed – and profits will likely tread "substantially" higher over 2025 and 2026, he added, thanks to stellar GDP growth.
Nominal GDP is expected to grow 40% from its pre-pandemic levels by 2026, Federated Hermes predicted. As of the third quarter last year, GDP was already up 27% in nominal terms compared to 2019 levels.
The Fed also looks poised to start cutting interest rates, which is good news for stock investors, as looser Fed policy is expected to boost asset prices.
Though the Fed recently pushed back on hopes for a March rate cut, the downward direction of interest rates are clear, Auth said, which is bound to loosen financial conditions and be a positive for equities.
GDP is also likely to continue to beat expectations, he added, which can aid profits and stock profits.
Sooner or later, the S&P 500 is bound to test a level of 6,000, Auth predicted. That implies the benchmark stock index gaining as much as 23% over the next few years.
"Unlikely in 2024 and maybe even in 2025, but certainly feasible on a three-year view," Auth said.
Other strategists on Wall Street have been warning of a coming correction to stocks. The S&P 500 could pare its gains after seeing stellar returns in 2023, and a recession isn't completely off the table for the US economy.
But a small correction isn't likely to impact the long-running upwards trend in equities, Auth said.
"That doesn't mean a 10% or so correction can't happen; most likely it will when we least expect it. If it does, it would be a terrific chance to add more to stocks," he said. "We think the bull is back and it's time to get on board," he added.
Stocks dipped in the middle of this week as investors took in slightly more hawkish rate-cut guidance than they were expecting from the Fed, which pushed on rate the idea that lower rates are imminent. Many are still expecting aggressive monetary easing by the end of the year though, with a 42% chance priced in that the Fed could slash interest rates six times by the end of 2024, according to the CME FedWatch tool.
Stocks are still in the midst of one of the greatest bull markets seen over the last century — and it's flashing a present opportunity for investors to load up on equities, according to Federated Hermes.
That's because stocks are still riding a decade-long secular bull market, the investment manager said. The long-running streak of gains began in 2013, when the S&P 500 had finally recouped its losses from the 2008 recession and notched a new all-time-high.
" Presently, we are in the mid stages of one of the three great secular bull markets of the last 100 years," Federated Hermes chief investment officer Stephen Auth said in a note last week. "Like all bulls, it's had its share of steep 20-35% corrections (in 2018, 2020, and 2022), but never more than that and never for too long," he added.
The intact bull market was confirmed at the start of 2024, when stocks continued to surge and notched a new all-time-high to kick off the year.
Auth also pointed to signs that the outlook on stocks for the coming years is positive. Corporate earnings, for one, appear to have troughed – and profits will likely tread "substantially" higher over 2025 and 2026, he added, thanks to stellar GDP growth.
Nominal GDP is expected to grow 40% from its pre-pandemic levels by 2026, Federated Hermes predicted. As of the third quarter last year, GDP was already up 27% in nominal terms compared to 2019 levels.
The Fed also looks poised to start cutting interest rates, which is good news for stock investors, as looser Fed policy is expected to boost asset prices.
Though the Fed recently pushed back on hopes for a March rate cut, the downward direction of interest rates are clear, Auth said, which is bound to loosen financial conditions and be a positive for equities.
GDP is also likely to continue to beat expectations, he added, which can aid profits and stock profits.
Sooner or later, the S&P 500 is bound to test a level of 6,000, Auth predicted. That implies the benchmark stock index gaining as much as 23% over the next few years.
"Unlikely in 2024 and maybe even in 2025, but certainly feasible on a three-year view," Auth said.
Other strategists on Wall Street have been warning of a coming correction to stocks. The S&P 500 could pare its gains after seeing stellar returns in 2023, and a recession isn't completely off the table for the US economy.
But a small correction isn't likely to impact the long-running upwards trend in equities, Auth said.
"That doesn't mean a 10% or so correction can't happen; most likely it will when we least expect it. If it does, it would be a terrific chance to add more to stocks," he said. "We think the bull is back and it's time to get on board," he added.
Stocks dipped in the middle of this week as investors took in slightly more hawkish rate-cut guidance than they were expecting from the Fed, which pushed on rate the idea that lower rates are imminent. Many are still expecting aggressive monetary easing by the end of the year though, with a 42% chance priced in that the Fed could slash interest rates six times by the end of 2024, according to the CME FedWatch tool.