Four Stages

Stocks will probably climb about 5.9 percent through March 2012 if history is any guide, according to Birinyi Associates Inc., which examined data on bull markets since 1962. The Westport, Connecticut-based money-management and research firm found advances typically have four stages with the biggest gains coming in the first, when economic data rebounds, and the last, when investors who missed earlier gains buy shares.

The third phase of an advance is usually the weakest as economic growth slows, Birinyi said. While that may be happening now, the firm predicts equities will rise 51 percent by the end of the rally in 2013, based on average historical returns.

"We had two years where every data point was stronger than the next one, and earnings were just marching back to all-time peaks," said Jeffrey Kleintop, the chief market strategist at LPL Financial Corp. in Boston, which manages about $300 billion. "It's great, but that pace of growth is unsustainable, and ultimately you get to the point where businesses do need to reinvest to generate growth."

Profit Margins

Profit margins have reached the highest level since the end of 2007, data compiled by Bloomberg show. The expansion since 2009 has helped S&P 500 companies raise earnings for nine straight quarters.

"As sales start to emerge, attention turns to investment, to staffing, and to meeting the sales demand," Paulsen said. "We're not going to have profit growth going forward like we have had, but there's nothing uncommon about that, because of the economic cycle we're in. Even if margin slips a little bit, your overall earnings can still do fairly well."

Caterpillar in Peoria, Illinois, posted a 28 percent increase in adjusted earnings per share for the first quarter of last year, even as sales shrank 11 percent. It countered a slump in machinery and engine sales by lowering operating expenses 23 percent that quarter after cutting about 37,000 workers and contractors from late 2008 to the end of 2009.

Higher Sales

The company said on April 29 that revenue will climb to at least $52 billion this year, compared with an October forecast of less than $50 billion, as sales surge in developing countries. The stock is up 50 percent since Caterpillar started to report higher sales.