The S&P 500 has experienced a remarkable year, surpassing forecasts and posting a 23% gain in 2024. This strong performance marks one of its strongest two-year periods since the late 1990s. Despite high valuations, many analysts remain optimistic for the year ahead.
A historical analysis of S&P 500 annual returns reveals that 14.6% of the past 151 years saw annual returns between 20% to 30%. The majority of forecasters expect a 10% to 20% return range in 2025, although some note that a third consecutive year of 20% returns or more is historically rare.
Key factors supporting the US stock market include falling interest rates, deregulation, and lower corporate taxes. These factors have driven significant margin expansion in the past. However, tariffs could raise prices and inflationary pressures may pose headwinds to GDP growth and the US stock market.
The Magnificent Seven stocks – Nvidia, Tesla, and six other companies – drove over half of the S&P 500’s returns in 2024, with their capital spending exceeding $400 billion annually. With institutions expecting positive returns in 2025, a bull market is anticipated to continue.
Source: https://www.visualcapitalist.com/sp-500-annual-returns-since-1874