Think the stock rally is over? It may just be beginning

The stock market rally has already defied expectations this year, shrugging off geopolitical strife, economic uncertainty and global trade tensions to reach fresh record highs. Some analysts say the rally might just be getting started.

The Dow closed above 47,000 points for the first time ever on Friday, buoyed by cooler-than-expected inflation data that supported hopes for interest rate cuts from the Federal Reserve.

The S&P 500 has rallied 36% in just over six months, boosted by strong corporate earnings and optimism about Fed rate cuts. Enthusiasm about artificial intelligence had stoked bubble concerns but also contributed to the market’s ascent.

“Absent some truly surprising and unwelcome events, the current momentum in the stock market is likely to last through the end of the year,” Emily Bowersock Hill, CEO at Bowersock Capital Partners, said in an email.

Corporate America continues to impress

Stocks are historically expensive and US-China trade tensions persist. While there’s no shortage of concerns, the outlook remains positive for stocks, analysts said.

The bottom line: Corporate profits continue to impress Wall Street, and the Fed is expected to lower interest rates, providing legs for a rally.

Companies are expected to deliver strong results this quarter, driven by “above trend growth” from AI companies, AI-related investments and a resilient consumer, analysts at JPMorgan Chase said in an October 21 note.

About 86% of companies in the S&P 500 that have already reported third-quarter earnings have posted results that beat expectations, according to FactSet.

The S&P 500 posted a historically strong September and is on track to notch its sixth month of gains in a row. But even that extraordinary growth doesn’t rule out further gains, investors said.

A fear of missing out on the rally, or FOMO, is also keeping stocks float, according to Sam Stovall, chief investment strategist at CFRA Research.

“With the Fed likely to cut rates two more times this year, and with AI collaborations continuing, I think right now, we are trading on FOMO fumes,” Stovall said.

“We’re running on adrenaline,” he said. “Valuations are still stretched, but at least in the near term, things are still looking good.”

Concerns

Of course, it’s not all upside.

It’s a “high risk bull market,” according to Bob Doll, CEO at Crossmark Global Investments.

The labor market has shown signs of weakening in recent months. While consumer spending has held up so far, Doll said he is still concerned about a slowdown in spending — and a knock to corporate profits — if softness in the job market continues.

Wall Street will also be fixated on whether big tech companies can continue to impress with earnings. The Magnificent Seven group of tech stocks have accounted for roughly 41% of the S&P 500’s gains this year, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Meta (META), Microsoft (MSFT) and Alphabet (GOOG) are expected to report earnings after the closing bell on Wednesday. Apple (AAPL) and Amazon (AMZN) are expected to report earnings on Thursday. Nvidia (NVDA), the star of the AI show, reports earnings on November 19.

Tesla (TSLA) reported earnings on October 22, and its profits missed analysts’ estimates. Tesla shares are down about 1% since it reported earnings.

“While the bull case is potentially potent, we are not convinced that the rising tide will sufficiently lift all boats in terms of upside profit surprise,” Lisa Shalett, CIO at Morgan Stanley Wealth Management, said in a note.

Relentless resilience

The stock market has proved more resilient this year than many on Wall Street thought.

President Donald Trump’s tariff campaign has raised concerns about a slowdown in economic growth and resurgent inflation, but investors have tried to look past concerns and focus on corporate earnings.

Meanwhile, inflation data so far has been milder than expected. While the economy is showing signs of strain, like borrowers falling behind on car payments, the stock market has pushed higher.

“Next year will bring new challenges, but we wouldn’t advise getting in the way of the upward trend between now and year-end,” Chris Zaccarelli, CIO at Northlight Asset Management, said in an email.

Just this month, the Dow dropped 900 points on October 10 after President Donald Trump threatened new tariffs on China before recouping those losses and closing at a record high two weeks later.

Trump and Chinese leader Xi Jinping are expected to meet this week at the Asia-Pacific Economic Cooperation summit in South Korea. Tensions have flared since Beijing on October 9 announced new export controls on rare earths and Trump the next day threatened new 100% tariffs, set to take effect November 1.

If there were to be a further escalation in US-China trade tensions, it could be another opportunity to buy the dip, according to Keith Lerner, chief market strategist at Truist.

“If something actually all of a sudden becomes more tense, and both sides dig in, and that’s kind of a short-term risk,” Lerner said, “We would be leaning into that risk if it were to happen.”