The bull market in the US stock market enters its third year. What will happen next?

According to the Zhitong Finance and Economics APP, the U.S. stock market has had a good start in the third year of the bull market, with the S&P 500 index setting a new historical record on Monday. However, history indicates that investors need to prepare for potential pullbacks in the next 12 months. According to analysis by Sam Stovall, Chief Investment Strategist at CFRA Research, since 1947, all 11 bull markets that have reached their second anniversary have experienced at least one 5% or more decline in the following 12 months, with some even entering a new bear market. Stovall stated in a report to clients on Monday, "Since 1947, the average return of the 11 bull markets that reached their second anniversary is only 2%. In addition, all bull markets have experienced at least a 5% decline in the next 12 months, with five declines exceeding 10% but less than 20%, and three eventually evolving into new bear markets." Since the bear market low of 3577.03 points on the S&P 500 index on October 12, 2022, it has risen by nearly 64%. According to FactSet data, the index rose by 0.87% on Monday, closing at 5859.85 points. The data shows that in the first year of the current bull market, the S&P 500 index rose by 22%, which is the third lowest since 1947. However, the index rose by 34% in the second year, the highest among all second-year increases in bull markets since 1947, with a historical median of only 11.5%. Stovall believes that as the bull market enters its third year, the high valuations of the U.S. stock market, especially large-cap stocks, are concerning. Currently, the price-to-earnings ratio of the S&P 500 index is 25 times, the highest valuation level in the second year of a bull market since World War II, 48% higher than the median price-to-earnings ratio of all second years of bull markets since 1947. Stovall pointed out, "Price-to-earnings ratios typically contract in the third year of a bull market, as earnings per share growth tends to accelerate, confirming the optimism implied by the rapid price increases in the early stages of the bull market." However, John Butters, Senior Earnings Analyst at FactSet Research, noted that Wall Street analysts expect year-over-year earnings per share growth rates of 14.2%, 13.9%, and 13.1% for the fourth quarter of 2024 and the first and second quarters of 2025, respectively Butters also mentioned that the profit for the fiscal year 2025 is expected to increase by about 15%, while the growth rate for 2024 is expected to be around 10%. As investors focus on a new batch of corporate financial reports, the US stock market closed higher on Monday. According to FactSet data, the Dow Jones Industrial Average rose by over 200 points, an increase of 0.5%, while the Nasdaq Composite Index rose by 0.9%