S&P 500 Still Has Room to Fall, But Could Rip to the 6,000 Level

When Will the Stock Market Bottom?

The S&P 500 and Nasdaq are entrenched in a bear market, and fears of a recession are mounting. However, analysts believe the stock market will bottom near 3,000 over the coming months and mount a strong comeback—with the S&P 500 rallying to the 6,000 level.

Investors have been on a wild ride since the stock market crashed in March 2020 on concerns about how badly COVID-19 would damage the global economy. Those fears didn’t last long, as it took less than five months from hitting March lows for stocks to hit a new record. The 2020 bear market was the shortest in history and experienced the fastest recovery on record.

Thanks to artificially low interest rates, stocks continued to rally and entered 2022 at record levels. With inflation at 40-year highs, central banks have been forced to step back in and announce oversized rate hikes to curb inflation.

As a result, many believe the economy will tip into a recession. What makes the situation worse is that stocks have careened significantly lower.

As of June 20, the S&P 500 is down 23.7% from its early January record high of 4,818.62 in bear market territory, which is defined as a 20% drop from a recent high. The Nasdaq is also in a bear market, down 33.3% from its November 2022 highs. Meanwhile, the Dow Jones Industrial Average is on the cusp, faltering 19.2% from January’s record levels.

How High Could the S&P 500 Go in the Next Bull Market?

When it comes to bear markets, investors can take some solace in knowing that the stock market always finds a bottom and eventually climbs to new record levels. One question investors are currently asking is, “When the bear market will end?”

Unfortunately, that’s impossible to know. But if history is any indicator, the S&P 500 could bottom near 3,000 with the bear market replaced by a bull market.

The average peak-to-trough bear market fall is 37.3%, covering 289 days (less than 10 months). No two bear markets are alike. However, if the current bear market follows a similar pattern, stocks could bottom in mid-October, with the S&P 500 touching the 3,000 level. As mentioned, the S&P 500 is down 23.7% from its most recent record.

Once the index finally bottoms, investors can look forward to a sustained bull market. The average bull market lasts much longer than a bear market—at 64 months with an average return of 198%. That means the next bull market could propel the S&P 500 to 6,000 by late February 2023.

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