Ready for Liftoff: The Bull Market Strategies You Can Use NOW!

It’s been a great year for stocks! The Dow Jones Industrial Average has risen 16.1%; the S&P 500 Index 23.8%; and the Nasdaq, 27.3%.

The recent presidential election—as you can see in the charts above—added more fuel to the fire as investors had reduced their portfolio risk in anticipation of uncertainty over the election results and then jumped right back in (although with some volatility) when it became clear that there would be no uncertainty after all.

And the good news is this: It doesn’t look like the fun is over yet!

Economists and stock market pundits are looking for additional gains in 2025. Goldman Sachs is forecasting a 9% rise in the S&P 500 Index, based on a projected 11% growth in earnings per share of the companies in the index.

However, the lack of drawn-out election results and subsequent uncertainty are not the only reasons for the bullish outlook. Additional catalysts include:

Declining interest rates. The Federal Reserve has recently cut interest rates by 75 basis points, and sectors that should benefit include: Dividend-paying stocks, consumer defensive stocks, and growth stocks.

Expectations of governmental policy changes. Deregulation and less environmental legislation should help financial and fossil fuel businesses, as well as small-cap companies who often suffer under excessive regulatory oversight.

Predicted tariffs. The market expects Trump to impose additional tariffs on China, up to 20%. Some European companies may also be at risk. The net effect is probably going to be higher prices on any foreign goods, which will undoubtedly be passed on to consumers. That may be negative for multinational and certain tech companies (service and software, for example) but positive for domestic manufacturers. If history is any judge, sectors such as utilities, telecom services, and real estate may outperform, while automobile, capital goods, and technology hardware stocks may be under stress.

A more robust M&A and IPO market. Pundits think the relaxation of antitrust regulations, as well as a strengthening economy, will put both of these sectors back in play. Analysts at Bank of America report that historically, the M&A sector has seen 50% more activity under Republican administrations than Democratic ones. For 2025, analysts expect that the continuing bull market, undervalued small caps (relative to large caps), and narrow credit spreads should all lead to increased M&A activity.

Here are a few deals that Bank of America thinks are ripe for the picking:

Also, IPO activity was meaningfully higher during President Trump’s previous term than it has been compared to President Biden’s time in office.

Ramp up in corporate capex and research & development. Goldman Sachs Research is forecasting that “$4 trillion of corporate spending in 2025 will be roughly evenly split between returning cash to shareholders (buybacks and dividends) and investing for growth (capex, research and development, and M&A).” That should benefit growth stocks.

How Long Can This Bull Market Last?

Broadly speaking, there are three major long-term economic cycles:

• Recession ends and expansion begins, the early cycle when the stock market generally makes the most impressive gains and more cyclical and high-growth stocks (such as small caps) typically do well.
• The Fed raises interest rates as the economy heats up. About three months before this, and continuing for about nine months after, we enter a mid-cycle, when returns continue to be better than average, but not as good as in the early phase. Opportunity can be found in cyclical, high-yield investments.
• An expansion ends and a recession begins. For about a six-month period prior to the recession, stocks begin to turn flat, then begin to decline during the recession, with investors flocking to less economically sensitive, more defensive stocks.

The following chart shows the relationship between economic and market cycles.

This, of course, depicts historical averages. And as we all know, history never exactly repeats itself. So, we use it as a guideline. And, honestly, it hasn’t had such a good track record in this bull market, as you can see in the table below.

As shown in this latest early bull stage, the best sectors have been Energy, Technology, and Industrial (for the past three years). Of those three sectors, only one—Technology—typically does well in the early bull cycle. So, you see, nothing is written in stone.

And as far as stock style is concerned, in the last year, growth stocks have been the clear winners. value has bounced back, so I believe that we will continue to see opportunities in both growth and value, as well as increasing attractiveness for the small-cap sector.

Many economic and market soothsayers estimate that the last bull market began in October 2022.

And as the above graph shows, it hasn’t exactly been smooth sailing since then—lots of volatility, and then a new phase of the bull beginning in early 2024.

According to Carson Investment Research, since 1950, the average bull market for the S&P 500 has lasted five and a half years. But if you go back even further, from 1926 to 2019, the average bull market stayed around for 6.6 years, and investors gained 339%. But the most recent bull market ended in March 2020, and it had lasted for 11 years!

So, on average, we could potentially see a bull market for at least the next four years or so. So, there’s no time to waste!

How to Build a Portfolio for a Bull Market

Investors are not all the same. Some of us love risk; others are more comfortable with just a little risk; and plenty of investors are very risk averse.

So, before you begin constructing your portfolio, you need to determine just which category fits you best. I created the following survey to help you do just that. So, I hope you’ll take a few minutes to complete it to help you determine your personal risk profile.

Step 1: Investor Profile Survey—What’s Your Risk Profile?

*Please Note: Survey results are to be used as a guideline ONLY and we encourage you to retake the survey on a yearly basis to reassess your investor type.

1. I do not need a high level of current income from my investments. I am more interested in their long-term growth potential.

1. Strongly Disagree
2. Disagree
3. Undecided
4. Agree
5. Strongly Agree

2. I am concerned about the effects of inflation on my investments.

1. Strongly Disagree
2. Disagree
3. Undecided
4. Agree
5. Strongly Agree

3. I am comfortable holding onto an investment when it drops sharply in value.

1. Strongly Disagree
2. Disagree
3. Undecided
4. Agree
5. Strongly Agree

4. I am willing to accept a lower return on my investments if I can avoid significant volatility.

1. Strongly Disagree
2. Disagree
3. Undecided
4. Agree
5. Strongly Agree

5. I plan on using the money I am investing:

1. Within 6 months
2. Within 3 years
3. Between 3 and 5 years
4. Between 7 to 10 years
5. More than 10 years from now

6. My investments make up this share of assets (excluding my home):

1. Less than 25%
2. 25% or more but less than 50%
3. 50% or more but less than 75%
4. More than 75%

7. My most important investment goal is to:

1. Preserve my original investment
2. Receive some growth and provide income
3. Grow faster than inflation but still provide some income
4. Grow as fast as possible. Income is not important today

8. My primary source of income is:

1. Retirement pension and/or social security
2. Earnings from my investment portfolio
3. Salary and other earnings from my primary occupation

9. The worst loss I would be comfortable accepting on my investment is:

1. Less than 10%. Stability of principal is very important to me.
2. 10% - 20%. Modest periodic declines are acceptable.
3. 20% - 30%. I understand that there may be losses in the short run but over the long term, higher-risk investments will offer higher returns.
4. Over 30%. You don’t get high returns without taking risks. I’m looking for maximum capital gains and understand that my investment can substantially decline.

10. If the stock market were to suddenly decline by 15%, my reaction would most likely be:

1. I should have left the market long ago at the first sign of trouble.
2. I should have substantially exited the stock market by now to limit my exposure.
3. I’m still in the stock market but I’ve got my finger on the trigger.
4. I’m staying fully invested so I’ll be ready for the next bull market.

11. I expect to retire in:

1. 5 years or less
2. 5 to 10 years
3. 10 to 15 years
4. 15 to 25 years
5. More than 25 years

Possible Answers:

11-27: Conservative – As a conservative investor, you are less willing to accept market swings and significant changes in the value of your portfolio in the short or long term. Capital preservation is your primary goal, and you may plan on using the principal from your investments in the near term, preferably as a steady income stream. The average level of return you expect to see is 5%-10%, annually.

28-40: Moderate – As a moderate investor, you seek longer-term investment gains. You are comfortable with some swings in your portfolio’s performance but generally seek to invest in more conservative stocks that build wealth over a substantial period of time. The average level of return you expect to see is 10%-25% annually.

+40: Aggressive – As an aggressive investor, you primarily seek capital appreciation and are open to more risk. Swings in the market, whether short- or long-term, do not impact your investment decisions and you have confidence that volatility is necessary to achieve the high return on investment you are looking for. You typically expect a 25%+ return, annually, though you do not need your principal investment immediately.

Step 2: The Importance of Diversification

You can think of diversification simply as this: “Don’t put all of your eggs in one basket.” Instead, create a portfolio that has a variety of non-correlated assets, essentially, assets whose prices move in opposite directions. That way, if one stock, sector or style of investing underperforms, you have a fighting chance that some of your other assets will rise, ultimately reducing your losses.

Many investors pay no attention to diversification. Instead, they find a sector or industry they like and invest their entire portfolios in one place. That’s great if all of those stocks just keep going up. But the laws of nature—and the stock market—never work that way for long.

Consequently, those investors eventually lose their shirts because even the very best sectors don’t rule the market forever.

The bottom line is this: By adequately diversifying your portfolio, you reduce the risk that all of your assets will decrease in value simultaneously.

Having said that, you should know that there is no perfect selection of non-correlated assets. Like all aspects of investing, the correlation of assets is subject to change over time, through different economic and investment cycles.

As a result, you should think of your portfolio diversification as a moving target. You will need to monitor it regularly so that you can move investments in and out, as cycles change. Fortunately, the major economic cycles are generally years long.

Diversifying your portfolio is as simple as populating it with a mix of small-, mid-, and large-cap stocks; value and growth investments; dividend-paying stocks, and investments in diverse sectors. This diversification will help reduce your overall portfolio risk, as well as its volatility.

When market action causes some of your assets to decline in value, others should rise, effectively providing protection against your entire portfolio declining at the same time.

And while you may think you are properly diversified because you may have 10 different technology stocks that operate in totally different segments, remember that they are all still technology stocks—companies that tend to do very well when the economy is steaming ahead, and folks have plenty of money to upgrade, but they don’t fare as well in a stumbling economy.

You should also have exposure to international stocks, either through owning multinational companies, mutual funds or exchange-traded funds.

Step 3: Setting Price Targets

I believe in setting price targets on the day you purchase your stocks. Your target should be based on the P/E of your stock, multiplied by expected future earnings. I recommend that you at least think about what price your stock can achieve within 18-24 months. And that should at least be a 30%-50% gain. If it doesn’t have that potential, keep looking.

Going forward, when the stock hits your target, reevaluate it and determine if it has the ability to continue double-digit price gains or if you would gain more by cashing in now and using those funds to purchase a different stock with more potential.

When I speak at Money Shows across the country, I am frequently asked about how I set my target prices. If it’s not the most common question I get, it’s certainly up there in the top five.

First of all, I can’t emphasize too strongly that it is essential to set a target at the time you buy a stock. If you don’t, then how the heck do you know when your stock has appreciated enough to sell it?

I always ask my workshop attendees how many set price targets on their stocks, and I never see more than two or three hands go up. That’s a shame, but I think it’s because folks just don’t know how to set targets, rather than them not wanting to. So, let me tell you how I do it, but keep in mind that, like all investing, it is not black and white. It’s a combination of science, art and experience. But most of all, it’s easy! No complicated math here—just a few assumptions.

Let’s walk through an example step by step. For this example’s sake, we’ll set your holding period at three years, max.

You’ve done your research and have selected the stock you want to buy—the Widget Co. The price of the stock is $10 per share, the company made $2.00 per share in the last four quarters, so its price-earnings ratio (P/E) is 10 divided by 2, or 5.

The company’s earnings have been increasing at a 20% annual growth rate for the past five years. With a little calculation, you can project out over the next three years, and if that same growth rate continues, the company’s earnings will look like this:

Year 1: 2.00 x a 20% increase = $2.40 per share
Year 2: 2.40 x a 20% increase = $2.88 per share
Year 3: 2.88 x a 20% increase = $3.46 per share

So, at year 3, your company is earning $3.46 per share. Now, if its P/E ratio remains the same (5), the projected price of the shares can be found by mere substitution into the P/E equation, and solving for P:

P divided by E (3.46) = 5. So, a little algebra later, P = $17.30. Wow—that’s a 73% gain! Most investors would be tickled pink by that.

However, should you believe that the company’s earnings may grow even faster than 20% annually, due to some event such as a tremendous new product, gains in market share, new markets, etc., or that one of those occurrences might drive the company’s price greater than $17.30 (even without the requisite earnings growth), you would be even happier.

To be on the safe side, it’s also smart to calculate what would happen should the Widget Co. not grow as quickly over the next three years as it has done for the past three.

Easy as 1-2-3, right? OK, it’s time to practice this exercise. I’ve shown you each step of the process in the following worksheet, so you can see exactly how I’ve come up with these projections.

COMPANY NAME; SHARE PRICE: Widget Co.; $10.00
P/E: 5
https://finance.yahoo.com/quote/your stocks symbol/analysis/
EPS (last 4 quarters): $ 2.00
http://reuters.com; estimates
5-year annual earnings growth rate: 20.0%
https://www.reuters.com/markets/companies/your stocks symbol/key-metrics/growth

Scenario 1 – Projecting future earnings growth at same rate as current
Year 1 earnings projection:
EPS x annual EPS growth rate projection (20%) = Year 1 EPS $ 2.40
Year 2 earnings projection:
Year 1EPS x annual EPS growth rate projection = Year 2 EPS $ 2.88
Year 3 earnings projection:
Year 2 EPS x annual EPS growth rate projection = Year 3 EPS $ 3.46

Scenario 2 –Earnings growth rate different than current rate
Year 1 earnings projection:
EPS x annual EPS growth rate projection (25%) = Year 1 EPS $ 2.50
Year 2 earnings projection:
Year 1EPS x annual EPS growth rate projection = Year 2 EPS $ 3.13
Year 3 earnings projection:
Year 2 EPS x annual EPS growth rate projection = Year 3 EPS $ 3.91

Scenario 3 –Earnings growth rate different than current rate
Year 1 earnings projection:
EPS x annual EPS growth rate projection (16%) = Year 1 EPS $ 2.32
Year 2 earnings projection:
Year 1EPS x annual EPS growth rate projection = Year 2 EPS $ 2.69
Year 3 earnings projection:
Year 2 EPS x annual EPS growth rate projection = Year 3 EPS $ 3.12

Now, you can substitute those results into the following equations to obtain the projected price of the company’s stock in 3 years:

Scenario 1
Expected Price = Current P/E x Year 3 EPS projection $ 17.30

Scenario 2
Expected Price = Current P/E x Year 3 EPS projection $ 19.55

Scenario 3
Expected Price = Current P/E x Year 3 EPS projection $ 15.60

And there you have it! So, now you can use a similar methodology on all of your stocks. But remember, the targets are a result of the projections you estimate, and if you alter those estimates—even a little—you will change your results. After all, I did say investing was also an art!

I hope you’ll have some fun with this. I think setting a target is one of the most important ingredients for success as an investor. The process will make you very familiar with your holdings, teach you to be disciplined, and help you determine when to sell your stocks.

Step 4: Setting Stop-Losses

I recommend that you set a stop-loss limit the day you purchase your stocks. For aggressive investors, the stop-loss could be 30% or more. For more conservative investors, you might be happier with a stop-loss of 10%. The actual percentage is not as important as being disciplined in exercising the stop losses. Sure, no one likes to lose money, but a stock riding momentum down can clean you out in no time, so it’s best to take your losses. If the stock bounces back, you can always buy back into it. Many of our advisories provide stop-losses for you, but it’s always a good idea to consider your own investment strategies when setting your stop losses.

A stop-loss is simply an order—either formally placed with your broker—or a “mental” reminder—to sell your stock when it reaches a certain price threshold.

It’s painless to place when you buy your stock through your broker’s website, or, if you prefer, you can just set an alert on whatever portfolio tracking website you use, so that if the stock reaches that price, you can make an instant decision on whether to cut it loose or keep it. That’s what I call a “mental” stop.

I’m a big believer in stop-losses for one simple reason: If your stock doesn’t go the way you think it will (up in most cases!)—for whatever reason—this little tool will limit your potential losses.

Sure, it’s true that if you are diligent in the use of stop-loss orders, you can be stopped out of what could turn out to be a very good stock. But you know what? You can always get back in, and more importantly—stop-losses can also save you money—as well as lots of sleepless nights—if market or industry forces cause your stock to take a nose-dive.

The actual percentage you set is up to you, according to your personal risk tolerance. Once you’ve determined your risk tolerance from the above survey, here are some tips for setting appropriate stop losses.

Very conservative investors may want to place their stops at a level that is 10%-15% below their purchase prices.

Moderate risk takers would probably feel most comfortable setting stop losses at 15%-25% below their buy prices.

Aggressive investors who have a longer time frame and can avoid panicking at short-term losses may desire to set stop-losses at 25%-35% of their purchase prices.

Here’s how it works: If you buy a stock at $3.00, and use a 20% stop, you would be stopped out at $2.40 (20% or $0.60 less, in this case, than you paid for it).

In normal times, I often find that a 20% stop is sufficient for most stocks; up to 35% if the company operates in a fairly volatile industry.

But in a bull market—like the one we are now in—you may want to use trailing stops—stop-losses that continue to move up as your stock rises—rather than stops based on the absolute value of your purchase price. A trailing stop is more flexible than an absolute stop, as it continues to allow you to protect your portfolio in case the price of your stock declines. But as the price rises, the trailing stop is based on the new price, helping you to lock in your gains and reduce your overall risk.

Using the scenario above, imagine you buy a stock at $3.00 and place a 20% trailing stop. If the stock falls to $2.40, you are stopped out. But let’s say it rises to $3.50. Your new stop would be 20% of $3.50, or $0.70. So, if the shares then fall to $2.80 ($3.50-$0.70), your stop will kick in. Instead of losing the $0.60 that you would have with the absolute stop, you only lose $0.20 (your original investment of $3.00 minus the stop price of $2.80).

I want you to know that there are plenty of advisors who don’t believe in stops. But I believe that wise investors should use all the credible tools at their disposal. And I have found that stop-losses have worked very well for my subscribers and are great tools for stemming potential losses.

With technology and biotech stocks—which tend to be more volatile than more conservative companies—it’s a good idea to set your stop losses a little wider. For example, with those kinds of stocks, I would usually suggest a 30% trailing stop. That way, if the market just causes the shares to slip a bit one day, it allows you to ride out a temporary drop, without inadvertently cashing out of a company with excellent long-term potential.

Step 5: Monitor, Rebalance, and Reposition Your Portfolio

With the new year right around the corner, January is a great month to take “stock” of your holdings and see just how you are doing at meeting your long-term goals. Once a year is the minimum frequency that I would recommend you review and rebalance; quarterly is really a better strategy, as markets can rapidly change.

And once you have your portfolio built, you’ll find that, in a bull market, many of your stocks will rise. That will make your original portfolio allocations look very different, and you may find that you have too much invested in one particular company or sector.

For example, if you set your original allocations to invest 15% of your portfolio in technology and the bull run has greatly increased the prices of your tech holdings, you may find that you are now 20% invested in technology. So, if your original allocations are still your goal, you will want to adjust your tech holdings and invest that other 5% into a different sector.

Consequently, in a rising market, you may be over-invested in certain sectors and under-invested in others. I love setting aside some money for “fun”—more speculative investments, but I’m a great believer that—for the most part—investors should practice diversification—by sector, style, and market capitalization, and invest in mainstream (not too risky) companies.

Step 6: Ideas for Portfolio Allocation

For most investors, as we age, our investment portfolio will become more conservative and less risky.

Here are some suggested allocation portfolios of stocks/ETFs, bonds/income, and cash, based on your age range:

Next, the following suggestions are for allocating your portfolio based upon your age and risk tolerance.

The Best Sectors for This Bull Market

Now, you have the building blocks for constructing and maintaining a portfolio fine-tuned for your age and risk tolerance.

Next, let’s look at which sectors are attractive in this bull market. In this article, we’ll concentrate on ETFs, as those are the easiest investments for the beginning investor. As your investing knowledge and experience grow, you will most likely want to add some individual stocks to your holdings.

Right now, the following sectors look attractive in this rising bull market:

• Growth stocks
• Small-cap stocks
• Financial: credit card companies, banks
• Energy: natural gas and American oil producers, oil service companies
• Hospitality: lodging, cruise lines
• Industrials sector
• Transportation—trucking, railroads
• Private prisons
• Cryptocurrency

I expect to see some pretty significant deregulation of the financial and transportation industries in the next few years and increasing privatization in education and prisons. The strengthening economy will make hospitality and industrials more attractive. And President-elect Trump’s advocacy of cryptocurrency will open up new opportunities in that arena (although I do not recommend that sector for inexperienced investors).

5 ETFs for the Bull Market

The following table shows ETFs that are all in the Stock of the Month portfolio. As you can see, they are diversified into four different sectors, with the last one a broad-based ETF covering the companies in the S&P 500 Index.

If you are a beginning investor, these ideas will help you get started. If you are further along in your investing experience, I hope they will give you some new ideas.