S&P 500 Hits Historic Highs in 2024: Is a "Three-Peat" Possible in 2025?

Donald Morgan |
S&P 500 Hits Historic Highs in 2024: Is a "Three-Peat" Possible in 2025?
 
The S&P 500 closed 2024 with 57 record highs and an annual gain of 23.3%, marking a remarkable achievement for U.S. equities. For the first time since 1998, the index posted back-to-back annual gains exceeding 20%, raising the question: Can the market deliver a third consecutive year of outsized returns?
 
Key Details
 
The performance of the S&P 500 over the past two years was driven by a combination of factors:
 
  • Economic Recovery: Post-pandemic rebounds fueled consumer demand and corporate earnings.
  • AI and Technology: Transformative innovations in artificial intelligence and green tech lifted major sectors.
  • Accommodative Monetary Policy: The Federal Reserve’s stabilization of interest rates created favorable market conditions.
Historical Context
 
While consecutive years of 20%+ gains are rare, they are not unprecedented. Key periods include:
 
  • 1995-1998: The dot-com boom fueled four consecutive years of growth.
  • 1954-1956: Post-war economic expansion underpinned strong equity performance.
However, historical patterns suggest a tapering of returns after such streaks. Elevated valuations and emerging risks could make another 20%+ gain in 2025 less likely.
 
Outlook for 2025
 
Optimism persists for continued market gains, supported by:
 
  • Corporate Earnings Growth: Particularly in technology and renewable energy.
  • Innovation: Advances in biotech, green energy, and AI are expected to attract investment.
  • Geopolitical Stability: A calm global environment could sustain investor confidence.
Risks Ahead
 
Challenges include high valuations, potential Federal Reserve tightening, and geopolitical uncertainties. Market corrections often follow periods of prolonged growth, as investors lock in gains and external pressures emerge.
 
Conclusion
 
While history shows that a third consecutive year of 20%+ returns is rare, strong economic fundamentals and innovation could defy the odds. Long-term investors are encouraged to focus on diversification and avoid being swayed by short-term market momentum.
 

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified
portfolio. Diversification does not protect against market risk.


The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on
stock exchanges in the United States. Indexes are unmanaged and cannot be invested in directly.


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