The S&P 500 (^GSPC -1.11%) is the most widely recognized benchmark of stock market activity in the U.S., comprised of the 500 largest companies in the country. Because of its broad base of constituent businesses, it is considered by most investors to be the most reliable gauge of overall stock market performance.

The index has consistently reached new heights over the past couple of years, driven by a flurry of positive developments:

Spurred on by this improving backdrop, the S&P 500 is on track to deliver its second consecutive year of returns greater than 20%. The market hasn't been able to pull that off since 1998, and it could foreshadow a big move for the stock market in 2025.

A person looking at the tickers for a stock market exchange.

Image source: Getty Images.

A resilient rally

After enduring the worst economic landscape since the Great Recession, investors have cause to be optimistic. The stock market has charged higher over the past two years, with the S&P 500 rising 24% in 2023 and posting gains of 28% so far in 2024 (as of this writing). In all, the benchmark index has closed at a record high 57 times this year, with the potential for more on the horizon.

The S&P 500 has generated gains of 20% or more in successive years just eight times over the past 74 years. If it's current trajectory continues, it could signal a big move for the benchmark index in 2025.

The current bull market celebrated its second anniversary on Oct. 12. While no two rallies are the same, history can provide a frame of reference. The average bull market runs for a little more than five years, or about 51 months. Since the current rally began just two years ago, this suggests additional upside ahead. Since the market bottomed, the S&P 500 has risen 70%. For context, the average bull market delivers returns of 180%, on average, so the data suggests the rally has room to run.

Don't take my word for it. Ryan Detrick, chief market strategist for financial services company Carson Group, examined total returns dating back to 1950 and discovered just eight occasions when the S&P 500 returned 20% or more sequentially. The market generated additional gains 75% of the time, delivering additional average returns of 12%.

He also pointed to one extraordinary stretch in the 1990s when the market delivered "an incredible record five years in a row of 20% or more gains." While that's clearly an outlier, it helps illustrate the potential for additional upside that exists. "Bull markets last longer than you think," Detrick noted.

"When you have an economy that continues to surprise to the upside, you tend to have solid earnings," Detrick said. Wall Street expects the S&P 500 companies to deliver earnings per share (EPS) of $269 in 2025, 19% higher than in early 2023. Additionally, earnings estimates continue to ratchet higher, which has historically been a bullish signal.

Collectively, the improving economic backdrop, historical data, rising corporate profitability, and bullish feeling on Wall Street suggest the rally will likely continue into next year.

However, to quote Benjamin Franklin, "Nothing is certain except death and taxes." Any number of things could go wrong and derail the current bull market. An economic downturn, the advent of a trade war, or a Black Swan event could disrupt the rally. That said, the available evidence suggests 2025 will be a good year for investors.

^SPX Chart

Data by YCharts.

Time is the great equalizer

Without a time machine or a crystal ball, there's no way to know for sure where the market will be once we close the books on 2025 -- or 2024, for that matter. However, many on Wall Street are going on record with their predictions, and most are generally bullish in nature.

Deutsche Bank recently increased its 2025 year-end target for the S&P 500 to 7,000, representing potential gains of 16% (compared to Wednesday's market close). Yardeni Research is looking further ahead, expecting the index to reach 7,000 next year, 8,000 in 2026, and 10,000 by the end of the decade, which suggests additional upside of 64%, resulting in a five-year-long bull market. He believes strong earnings are laying the foundation for the rally to continue.

Just this week, Oppenheimer Chief Investment Strategist John Stoltzfus became Wall Street's biggest bull, predicting a target of 7,100 for 2025, suggesting potential gains for the S&P 500 of 17% over the coming year. This helps illustrate the rising tide, as optimism grows.

To be clear, this is all fun with numbers, and no one really knows what the future holds. What we do know, however, is that the future favors investors who hold for the long term, as it tends to even out the peaks and valleys that are an inevitable part of investing. Despite those ups and downs, the stock market has returned 10% annually, on average, over the past 50 years, resulting in a bonanza for patient investors.

History is clear. Buy stock in the best companies out there and hang on for the ride. Time will do the rest.