Why I’m expecting stocks to soar over the next four months

What a year, so far. The S&P and Nasdaq are both sitting near all-time highs. The Dow is within striking distance of theirs. And it looks like the small-cap Russell 2000 is finally getting ready to embark on its long-awaited upside breakout.

What a difference a handful of months can make.

Stocks sank earlier in the year on tariff concerns, before bottoming in early April.

Since then, the major indexes have all surged by double-digits from their 4/7 lows, with the Dow up by 22.8%, the S&P up by 33.4%, the Nasdaq up by 46.3%, and the small-cap Russell 2000 up by 31.9%.

The market went from panic to fear-of-missing-out. And rightly so.

But in spite of the eye-popping gains over the last several months, most of the major indexes are only up single-digits for the year.

But the outlook is for much, much more.

And for those who missed the recent rally, or wished they would have taken better advantage of it, the good news is the next leg up could be even more spectacular.

And that’s exactly what I’m expecting.

History repeats itself

Last year saw the S&P 500 soar by 23.3%.

That was the second year in a row of 20%+ gains. (2023 was up 24.2%.)

That’s a feat rarely seen in the past.

In fact, it was the first time it was up 20% or more for two years in a row since 1995-1996. (Prior to that, you’d have to go all the way back to 1954-55.)

In 1995 the S&P was up 34.1%. That was the beginning of the dot-com (technology) boom.

In 1996 it was up 20.3%.

So, what happened in 1997? It was up another 31.0%.

1998? Up another 26.7%.

And in 1999, it was up 19.5%.

A spectacular rally that lasted 5 long, glorious years.

Yes, the dot-com bubble arrived in 2000. But not before people got rich over the preceding 5 years with a 220% increase in the S&P, while plenty of individual stocks were up several hundred percent to several thousand percent.

And I believe we could possibly see the same thing again now. Maybe 5 years or more of boom times – for similar reasons, and some unique to the present day.

Tech booms: Past and present (AI tech boom is alive and well)

The tech boom back then saw everybody go nuts for technology stocks, driven by the internet and dot-com companies.

It was new and exciting. And the internet was forecast to change the way people shopped, did business, and interacted with each other.

The promise was real, as we now know.

So, what’s the parallel?

In part, it’s another tech boom.

But this modern technology boom is being driven by Artificial Intelligence (AI).

And it’s forecast to be just as transformative as the personal computer, the internet and the mobile phone. And it’s expected to touch virtually every industry in some way shape or form, as well as impact ordinary lives.

The AI trade has worked so well for a reason — because the AI boom is real, and is supported by real earnings, and real growth potential.

But there are plenty of other catalysts that make the market outlook even more exciting.

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