The stock market, as reflected by the S&P 500 (^GSPC), has been on fire lately. With the current index performance, it’s doing something only four times since its inception in 1923 – delivering back-to-back annual gains of 24% or more. Historically, this phenomenon is rare and often followed by a downturn.
However, looking at past data, there are some precedents that could influence the S&P 500’s performance in 2025. The index has had instances where it delivered strong gains after previous years with similar returns. But these instances were also followed by significant declines in subsequent years.
The key takeaway from history is that just because the S&P 500 has delivered strong returns in the past, it doesn’t necessarily mean it will continue to do so. The current market environment is different, with factors like low interest rates, a potential corporate tax cut, and reduced regulatory burdens on businesses that could contribute to further growth.
On the other hand, high valuations of stocks and concerns about tariffs leading to higher inflation and interest rate increases could lead to a decline or mediocre returns in 2025. Investors should maintain a long-term perspective, considering the S&P 500’s average annual total returns over the years have been close to 10%, enough to make patient investors a lot of money.
Source: https://www.fool.com/investing/2024/12/15/the-sp-500-is-on-track-to-do-something-its-only-do