The bull market in the U.S. stock market is about to mark its second anniversary, representing the latest milestone in this cycle's rebound, which has exceeded the expectations of almost everyone except for the most optimistic investors on Wall Street.

Since the S&P 500 index reached a closing low of 3,577.03 on October 12, 2022, the index has risen by more than 60%, a gain that has far outpaced the expectations of many financial professionals, forcing Wall Street institutions to repeatedly raise their year-end targets.

Data shows that despite some fluctuations in the upward path over the past three months, the overall bull market has shown little sign of slowing down. According to FactSet, the Cboe Volatility Index (VIX), known as the "Wall Street Fear Index," hit its highest intraday level since March 2020 on August 5th, during a significant global market downturn. However, this panic quickly subsided, and the stock market rebounded swiftly. A similar downturn occurred in the first week of September, but this correction also attracted investors' demand to buy low.

Since then, the S&P 500 index has performed strongly in the first three quarters of this year, setting the best performance since the late 1990s. If it can maintain the current upward trend until the end of the year, the S&P 500 index will rise by more than 20% for two consecutive years, a feat not seen since 1998.

However, the potential risks facing the market have increased recently. The current valuation of the U.S. stock market is relatively high compared to historical levels, second only to the peak at the end of 2021. In addition, geopolitical risks have resurfaced, with the conflict between Israel and Iran escalating again, driving up oil prices and causing anxiety among stock market investors.

With the arrival of the third-quarter earnings season, investors will closely monitor the earnings reports of giant companies such as Microsoft (MSFT.US) and Alphabet (GOOGL.US, GOOG.US), hoping to find clues as to when these companies' substantial investments will yield returns. Subsequently, the earnings report of NVIDIA (NVDA.US) will also be under scrutiny. NVIDIA performed strongly in the last round of earnings in August but still failed to boost its stock price.

Furthermore, the U.S. general election on November 5th has led many traders to purchase hedging tools to guard against potential volatility that the election results might trigger, especially in the event of a contested outcome.

Due to these uncertainties, millions of investors worldwide are seeking guidance on the market's next move.

A group of analysts at Ned Davis Research delved into the performance of bull markets at the two-year mark. Data shows that since the end of World War II, there have been 12 bull markets that lasted at least two years. If the current bull market can continue through this weekend, it will become the 13th.

Seven of these bull markets successfully entered their third year, indicating that the probability of the current bull market continuing is favorable for investors. According to Ned Davis's statistics, the median gain of the past 12 bull markets at the two-year mark was 54.4%, which means that the gains of the past two years are not particularly significant compared to history.The future trend is even more difficult to predict. According to the analysis by Ned Davis's team, bull markets typically achieve a median increase of 13.3% in their third year, but bull markets that failed to continue experienced a 5.9% retracement.

It is worth noting that bull markets do not end due to "aging." Ned Davis's analysis shows that the end of each bull market is triggered by some catalyst. Economic recession is the most common reason, leading to its end in the third year in three different bull markets. The fourth exception occurred in October 1966 when the Federal Reserve tightened monetary policy to combat inflation, thereby ending the bull market.

The fifth exception was the bull market that began in March 2009, when the stock market decline was caused by a global panic triggered by Standard & Poor's downgrade of the U.S. credit rating and the European sovereign debt crisis.

The Ned Davis team believes that as long as the following three conditions are met, the current bull market is expected to enter its third year.

Firstly, the trend of inflation falling back since the end of 2022 must continue. If investors see clear signs of inflation accelerating again, it may trigger market fluctuations. Secondly, the Federal Reserve must successfully achieve a "soft landing" for the U.S. economy, that is, to control inflation within the target range of 2% while maintaining a slightly slower but still positive growth. If the economy enters a recession, the stock market may decline significantly. However, the Ned Davis economic team believes there is not much reason to worry about this at present.

Thirdly, the largest companies in the United States must continue to maintain profit growth. Wall Street expects that the profit growth of the "seven giants" companies benefiting from artificial intelligence will slow down later this year. Other companies will need to fill this gap. Although forecasts show that this is possible, forecasts always have uncertainties, and ultimately it will still depend on the economic performance in the coming year.

On Monday, the three major U.S. stock indexes fell, with the Nasdaq falling by more than 1.1%, and the S&P 500 and Dow Jones indexes falling by nearly 1%.