The bull market in the S&P 500 (^GSPC) began two years ago and is showing few signs of slowing.

Backed by the rise of artificial intelligence euphoria and a surprisingly resilient US economy, the S&P 500 has gained more than 60% in the past two years and is hovering near an all-time high.

Wall Street strategists who spoke with Yahoo Finance believe the bull can keep running wild. Barring any unexpected shocks, the path higher appears to be clear, with earnings growth expected to keep accelerating and the economy on seemingly solid footing as the Federal Reserve cuts interest rates.

In the past few weeks, several Wall Street equity strategists have made the case for the benchmark index to rise further into both year-end and into 2025, supported by accelerating earnings for the S&P 500.

"We continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted," BMO Capital Markets chief investment strategist Brian Belski wrote in a September note when raising his year-end price target for the S&P 500 to a Street high of 6,100 from a previous target of 5,600.

On Oct. 4, Goldman Sachs boosted its year-end target to 6,000 and initiated a 12-month target of 6,300. Goldman Sachs chief equity strategist David Kostin did note, though, that already high valuations could limit the upside for how far the index can reach in 2025.

Risks to the rally

Strategists who spoke with Yahoo Finance agreed with Kostin that already stretched valuations present a challenge to how much higher stocks can go. Charles Schwab senior investment strategist Kevin Gordon noted that dating back to the mid-1960s, the only time valuations have been this stretched on a trailing 12-month price-to-earnings ratio were 2021 and the dot-com bubble of the late 1990s.

"This would tell you that the bull is much older or somewhat near the end of this life," Gordon said.

But strategists often warn that a high valuation itself isn't a proper tool for calling the end of a bull market. Stocks can trade at what are considered to be expensive valuations for longer than expected. What that does tell investors is that much of the good news that could push stocks higher might've already been priced in.

"If you look at what the market's discounting right now, we'd say front and center, a big chunk of what's being priced in is a soft landing sentiment," Citi equity strategist Scott Chronert told Yahoo Finance.

Piper Sandler chief investment strategist Michael Kantrowitz noted that high valuations themselves aren't why bull markets end. There needs to be a catalyst. He explained there are two common reasons market drawdowns happen: a spike in interest rates or a rise in the unemployment rate.

With inflation well off the boil of 2022 and the recent increase in unemployment stalling out, neither of the two downside catalysts are clearly in view.

There could, of course, be a surprise no one sees coming. But "it's a little bit harder to see where the shock comes from," Chronert said. "If things continue to play out incrementally, investors can handle a little bit of a change [to the economic narrative] here, a little bit of a change there ... It's when you get a more immediate unraveling, and it's hard to really say that immediate unraveling is going to come."

This sets the market up for a narrative shift. To Kantrowitz, the currently expensive valuations show that the bull market is likely moving from a macro-driven environment, where factors like inflation falling and other signs of economic resilience have pushed stocks higher, to one that is more based on the fundamentals.

"For this market to continue moving higher, and particularly to determine what stocks lead, it's going to be all about earnings," Kantrowitz said. 

The bar for earnings remains high. Consensus estimates project earnings to grow nearly 10% in 2024 and almost 15% in 2025. The key for investors remains finding which sectors are seeing earnings growth accelerate rather than just staying steady.

And , according to Chronert, part of that story could come down to the two letters that defined the first part of the bull market: AI.

Chronert, who said his team is still a holder of the "Magnificent Seven" tech cohort, doesn't doubt that the AI narrative will continue to manifest itself in the market. But after significant gains seen in those tech stocks over the past two years amid large earnings growth, focus may continue to shift to the broadening impact of AI on companies that aren't making the AI chips or the cloud servers operating the new technology. 

For AI to continue to have broader impact on the market and keep pushing earnings growth for the index above expectations, "you've got to have more companies delivering on the AI promise via margins [and] profitability metrics," Chronert said. 

He added, "It would be that sort of thesis that has to play out, and that's going to take two to five years."

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