History Says Every S&P 500 Bull Market That Reached Its 4th Birthday Kept Going

The current bull market in the S&P 500 (SNPINDEX:^GSPC) turns 4 years old on Monday, Oct. 12. It began at a closing low of 3,577.03 on Oct. 12, 2022. And on Oct. 6, the index closed at a record 7,818.93 -- a gain of around 119% over nearly four years.

A gain that big can make index fund holders jittery, especially with a round-number birthday on the calendar. After all, bull markets don't last forever.

But age alone hasn't been much of a red flag. Every S&P 500 bull market since 1957 that reached its fourth birthday kept going past it. What happened after that, though, varied a lot.

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This bull market almost ended in 2025

The common rule says a bull market ends when the index closes at least 20% below its record. This one got close.

From its Feb. 19, 2025, record close to its April 8, 2025, closing low, the S&P 500 lost around 19% (18.9%, to be exact). Measured intraday, the drop topped 20%, so some investors date a new bull market from April 2025.

I'm using closing prices, like Yardeni Research's table of S&P 500 bull and bear markets does. And by that table's count, near misses have been common. During the 2009-2020 bull market, the index dropped 19.4% in 2011 and 19.8% in 2018. During the 1987-2000 rally, it dropped 19.9% in 1990 and 19.3% in 1998.

Neither bull market ended, and they later became the two longest since 1957.

What happened after the fourth birthday?

By Yardeni's dates, six S&P 500 bull markets since the index started in its 500-stock form in 1957 ran at least four years. The one that began in October 1957 ended around seven weeks after its fourth birthday, in December 1961. The 1982 and 2002 bull markets each ended almost exactly at age 5. The one that started in 1974 ran a bit over six years. And the bull markets that began in 1987 and 2009 lasted more than 12 years and nearly 11 years, respectively.

So, all six kept going, and five of them made it to about age 5 or beyond.

The gains after the birthday varied a lot, too. By my math, the index climbed around 7% from the 1957 bull market's fourth birthday to its high, and about 16% after the 2002 bull market's.

It gained about 37% to 38% after the 1974 and 1982 bull markets turned 4. Even more, it more than doubled after the 2009 bull market's birthday and about quadrupled after the 1987 one's.

Buying on the birthday wasn't always safe

Of course, a bull market that keeps going isn't the same as a good entry point. In four of the six cases, the bear market that eventually followed sent the S&P 500 below where it was on the fourth birthday, but just barely in the 1974 case.

Someone who bought in October 2006, around a year before the 2002 bull market peaked, was down about 50% at the March 2009 low (not counting dividends).

This bull market also begins its fifth year from a pricey spot. By my math, with FactSet's data, the S&P 500 trades at about 26 times the earnings its companies reported in the last 12 months.

That's above the index's 10-year average of 23.6 times earnings, according to FactSet. Measured against the earnings expected in the next 12 months, the index sits right around its 10-year average.

Investors can pay a high valuation for years before a bull market ends. But paying it might also mean a deeper drop when one hits, and a bear market may begin next month or several years from now.

For index fund buyers, I think the lesson is that the calendar isn't a good reason to sell or to quit buying. A bull market's age arguably hasn't said much about when it would end.

What a buyer can control is how they buy. Warren Buffett, for example, wrote in his 2013 letter to shareholders that his will tells the trustee managing cash for his wife to put 90% of it into a low-cost S&P 500 index fund. The Vanguard S&P 500 ETF, for instance, charges 0.03% a year.

Adding money to a fund like that on a regular schedule means some purchases may land around a top. But others could land after the next fall.

So, should the birthday change anything? I don't think so. I'd consider adding to an S&P 500 fund bit by bit, and I'd expect a bear market sometime along the way. History just hasn't been much help in saying when.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.