The new bull market in stocks continues to get more firepower.

The manufacturing and housing sectors are driving economic expansion in the medium term, while the Federal Reserve still appears ready to cut interest rates relatively soon. Moreover, stock valuations are still not excessive despite considerable gains in the first quarter, and history strongly suggests that equities will continue to climb for the next 12 months.

So in light of all of these points, I remain bullish on the long-term outlook for the stock market.

However, I do see a few major threats facing the stock market that are worth considering.

3 Catalysts Powering the Stock Market Rally

There are some signs that the U.S. manufacturing sector is finally recovering. Specifically, seasonally adjusted new orders for durable goods climbed an impressive 2.2% in February versus January, excluding defense. Overall orders increased 1.4%, representing their first gain since November 2023.

Even more impressively, the Leading Economic Index, which is weighted heavily toward the manufacturing sector, increased for the first time in 23 months in February. Although the index only inched up 0.1%, its move into positive territory certainly is a good sign for the economic expansion in general and the manufacturing sector in particular.

On the housing front, existing home sales surged a very large 9.5% in February versus January. That was the biggest month-over-month gain in 12 months. Also noteworthy is that an index of homebuilder confidence increased to 51 in March, representing an eight-month high, up from 48 in February.

Taken together, the statistics suggest that the number of home sales is increasing meaningfully. In addition to homebuilders, the latter trend will help many companies in the materials and construction sectors, along with many retailers.

And, in line with my prior predictions, the Fed remains on track provide a boost of confidence by cutting rates soon. Foreshadowing an imminent rate cut, Fed Chair Jerome Power acknowledged that recent inflation data “[is] definitely more along the lines of what we want to see.”

History Indicates That Stocks Will Head Higher

The forward price-earnings ratio of the S&P 500 was recently about 21 times. During the second half of the 1990s, an era that closely resembles present day due to tremendous technological advancements, Fed rate hikes, and a strong economy, forward price-earnings ratios were as high or higher than they are now.

For example, in July 1997, the forward P/E ratio was 23 times, and it was 28.4 times in May 1998. More recently, the index’s forward P/E was 24.7 times in August 2016 and 23.3 times in July 2017.

This is evidence that valuations are not currently too high. And in fact, history suggests stocks can move much higher.

Speaking on CNBC on March 29, investment manager Jim Lebenthal noted that the S&P 500 had risen 27% in the five months that ended in March. Out of 130 prior times in which the index had risen 27% or more in a five-month period, the index fell only one time over the next 12 months. And the average return in the year following those 130 instances was 15%. That bodes well for investors here.

But Investor Beware…

Despite many positive catalysts, investors are facing some significant risks.

First, oil prices have risen significantly in recent weeks. If they exceed $100 per barrel, they could cause inflation to reaccelerate, preventing the Fed from cutting rates and greatly stunting economic growth.

Secondly, as I have noted in the past, I believe that housing prices could sink even if the number of homes sales increase. That’s because many homeowners who have been waiting for interest rates to fall before selling their homes may soon put them on the market. Such a scenario could cause problems for banks and negatively impact consumer spending.

Finally, since 10%-15% corrections occur almost every year, investors should be prepared for such a pullback at some point in 2024.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.