Will the S&P 500 Bull Market End in a Stock Market Crash in 2025? Here's What History Says.

The S&P 500 (SNPINDEX: ^GSPC) has advanced 71% since entering the current bull market in October 2022. Factors contributing to that upside include a resilient economy supported by strong consumer spending and business investments, which itself has led to strong corporate earnings growth in recent quarters.

Some data points suggest the S&P 500 bull market will continue through 2025. In January, the manufacturing sector expanded for the first time in over two years, while the services sector expanded for 56th consecutive month. Additionally, Wall Street expects S&P 500 companies to report accelerating growth in revenues and earnings this year.

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However, other data points suggest the bull market is losing momentum. Bearish sentiment in February 2025 reached its highest level since November 2023, according to the American Association of Individual Investors. Additionally, while inflation has trended lower over the last three years, consumer price increases have now accelerated in four straight months.

Will the S&P 500 bull market end in a stock market crash in 2025? Here's what history says.

History says the S&P 500 bull market could continue for several years

Since its creation in March 1957, the S&P 500 has experienced 10 bull markets, a term that describes periods where the index advanced at least 20% from a bear market low. The chart below lists the month when each of those bull markets started. It also shows the return in the S&P 500 and the duration of each bull market.

Data source: Yardeni Research.

As shown above, the S&P 500 since its inception has returned an average 184% during bull markets, and it achieved those returns over an average of 1,964 days. Comparatively, the current bull market began 861 days ago, and the index has returned 71% during that period.

To elaborate, the S&P 500 traded at 3,577 when it entered the current bull market on October 12, 2022. If its performance aligns with the historical average, the index will advance 184% to 10,160 during the current bull market, implying 66% upside from its current level of 6,130.

Additionally, history says the S&P 500 will realized those returns over 1,964 days. That means the current bull market will run for another 1,103 days if its duration aligns with the historical average, such that it ends in late February 2028.

Here is the bottom line: History says the S&P 500 bull market could carry on for three more years, with the index increasing 66% over the next 1,103 days. That is roughly equivalent to a return of 18% annually.

Image source: Getty Images.

The U.S. economy is strong but the S&P 500 trades at an expensive valuation

Investors should bear in mind that historical performance is no guarantee of future results. Even Wall Street analysts have different outlooks on the current bull market.

• Ed Yardeni at Yardeni Research thinks the S&P 500 will remain in a bull market through the end of the decade as economic resilience continues to drive strong earnings growth. And Tom Lee at Fundstrat Global Advisors thinks the index could hit 15,000 by 2030.
• Andrew Simmon at Morgan Stanley believes the S&P 500 is the late stages of a bull market, and Gene Munster at Deepwater Asset Management expects a "spectacular bursting of the bubble" in about two years.

Importantly, the U.S. economy is on solid ground. Real gross domestic product (GDP) increased 2.8% in 2024, above the 10-year average of 2.5%. Additionally, the unemployment rate fell to 4% in January 2025, which is well below the 10-year average of 4.7%.

However, business fixed investments (spending on equipment, structures, and software) declined in the fourth quarter for the first time in nearly two years. Meanwhile, inflation has now accelerated in four straight months, which may weaken consumer spending. Those trends could drag on economic growth in the coming quarters.

Additionally, the S&P 500 currently has a forward price-to-earnings (PE) ratio of 22.2. That is a premium to the 10-year average of 18.3 times forward earnings, according to FactSet Research. Elevated valuations could drag on the stock market by pushing investors to consider alternatives like fixed income.

Indeed, the S&P 500 only achieved a forward PE ratio above 22 in two periods over the last four decades: the dot-com bubble in the late 1990s and the Covid-19 pandemic in the early 2020s. The stock market sold off sharply following both events.

Here is the bottom line: History says the S&P 500 bull market could continue for several years, but accelerating inflation and elevated valuations could be material headwinds in 2025. That does not mean the S&P 500 will crash this year, or any time soon, but rather that the current market environment warrants caution.

Investors should closely scrutinize valuations before buying stocks. They should also limit stock purchases to their best ideas. It would also be prudent to accumulate an above average cash position right now. Doing so will let investors capitalize on the next drawdown whenever it happens.

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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems. The Motley Fool has a disclosure policy.