To The Moon

$SPDR S&P 500 ETF Trust(SPY)$  

As we end 2024, many investors are concerned about the stock market. High valuations, re-inflation risks, and the potential changes under a Trump administration have left some wondering whether it's time to exit. However, a closer look at history and the current economic landscape suggests a strong bull market may be ahead, similar to the 1982 recovery. The S&P 500 could keep climbing with annual returns of 15-20% from 2025 through 2030, potentially pushing its value to 12,000-15,000 by 2030.

Concerns: High Valuations and Inflation

Many are cautious about the current market. With high valuations and inflation showing signs of a potential resurgence, fears of re-inflation and volatility under Trump 2.0 have surfaced. However, market cycles are inevitable, and as we emerge from a rolling recession and inflation moderates, we could see a new phase of growth—much like the one after the 1982 recession.

What Is a Rolling Recession?

A rolling recession occurs when different sectors of the economy experience contraction at different times, rather than a broad, simultaneous downturn. This makes it difficult to see in traditional economic metrics. For example, during the 2020-2022 recession, while sectors like hospitality and retail were hit hard by the pandemic, tech and housing continued to grow. This sector-specific downturn is why traditional recession indicators, such as GDP and unemployment, didn’t reflect a typical recession, but rather a rolling one.

Looking Back at 1982

After an extended period of stagflation in the early 1980s, the U.S. economy was struggling. However, tight monetary policy by the Federal Reserve eventually tamed inflation, paving the way for a booming market. By 1982, inflation was under control, and a strong bull market took off, lasting throughout the 1990s.

Key sectors that outperformed included:

1. Consumer Discretionary: More disposable income due to lower inflation boosted retail and consumer goods.

2. Technology: The rise of personal computing and semiconductors spurred growth.

3. Financials: Lower interest rates helped banks and insurance stocks rise.

2020s: A Similar Recovery Ahead?

We’re now experiencing conditions similar to 1982—with tight monetary policy and moderating inflation. The 2020-2022 recession, driven by the pandemic, has given way to disinflation, similar to the recovery that followed the early 1980s. By 2025, we could see another wave of growth driven by sectors like technology, consumer spending, and financials—similar to past recoveries.

Key Sectors Likely to Lead

In line with past recoveries, some sectors are poised for strong growth:

1. Technology: The AI boom, along with growth in cloud computing and green energy (including nuclear), will likely drive the market.

2. Consumer Discretionary: As inflation cools, retail, travel, and entertainment sectors could benefit from rising consumer spending.

3. Financials: With lower interest rates and improved lending conditions, banking and insurance stocks could perform well.

4. Renewables: The global push for green energy, especially in solar, wind, and nuclear, offers long-term growth potential.

A Strong Bull Market Ahead

Given these factors, the S&P 500 could experience strong growth over the next several years, much like the 1982-2000 bull market. Disinflation and lower interest rates are setting the stage for recovery. If we start from a 2025 S&P 500 price of 6,000, we could see:

1. 15% annual return: The S&P 500 could reach 12,068 by 2030.

2. 20% annual return: The index could climb to 14,929 by 2030.

Thus, starting from 6,000 in 2025, the S&P 500 could rise to between 12,000-15,000 by 2030.

Conclusion: Why Staying Invested Could Pay Off

Despite concerns about high valuations and inflation risks, history shows that markets can thrive in disinflationary periods after tight monetary policy. The S&P 500 is poised to continue its upward trajectory from 2025 to 2030, driven by innovation and a stabilizing economy. For investors, staying the course could result in impressive returns, with the potential for 15-20% annual gains and a target price of 12,000-15,000 by 2030. The future looks bright for those who stay invested and positioned for the growth ahead.