On Friday, the Nasdaq Composite index reached a new all-time high, marking the first such achievement since July. Data from DataTrek indicates there may be more than a 10% upside potential as stocks enter the third year of a bull market. According to DataTrek co-founders Nicholas Colas and Jessica Rabe, they maintain an optimistic outlook on U.S. large-cap tech stocks. Typically, the third year of a bull market has resulted in an average increase of 4.4% for the tech-focused Nasdaq. However, this rally can reach 13% in years without major disruptions, with some instances showing gains of up to 20%.
This potential is contingent on the absence of significant economic or geopolitical disturbances. Such a stable environment is difficult to predict, especially with the United States approaching a tightly contested presidential election, which may face delays due to increased absentee voting. Additionally, ongoing conflicts in the Middle East and Europe pose threats to global stability and have occasionally led to market volatility.
Another positive year for the Nasdaq is not guaranteed. Historically, two-year bull markets following a losing year, like the current pattern since 2022’s downturn, have extended into a third year just 60% of the time since 1971. Despite these challenges, the Nasdaq has managed to climb, recently setting a new intraday record, the first since July.
