A trader on the floor of the New York Stock Exchange at Opening Bell in New York City on February 12, 2025.
Angela Weiss | AFP | Getty Images
Stock market investors have enjoyed annual returns over the past two years. However, it may not be offering “3 peats” in 2025, investment analysts say.
The S&P 500 Stock Market Index brought 23% returns to investors in 2024 and 24% in 2023 (their revenues were 25% and 26%, with dividends).
The third consecutive year’s total revenue of more than 20% of US stocks is a historic scarcity. According to Scott Wren, senior global market strategist at Wells Fargo Investment Institute, it only happened once in the late 1990s, dating back to 1928.
“Are you hoping for 3 peats in the S&P 500 index in 2025? In short, no,” Wren wrote in Wednesday’s market commentary.
The US stock market has reached an average annual revenue of around 10% since 1926, according to asset manager Dimensional. According to McKinsey’s analysis, after considering inflation, the stocks averaged 6.5% to 7% per year to around 1,800 people.
Callie Cox, chief market strategist at Ritholtz Wealth Management, said over the past two years he has been “spoiled as an investor.”
“The 21% profit was not the norm,” Cox said. “20% profit is the exception.”
What might ruin the party?
Although history is “not the gospel,” Cox said, there is reason to believe that stock markets may not function similarly in 2025.
For one, Wren said there are a number of uncertainties that could negatively affect the stock market, such as tariffs and potential rebounds of inflation. Surges in bond yields could also lead to headwinds, Ren wrote in the market commentary. (Higher yields could weaken demand for US stocks.)
More details from personal finance:
30% of Americans increased their emergency savings in 2024
These red flags could trigger an IRS tax audit
US Court of Appeals Biden Save Plan for Student Loans
Additionally, tech companies have been a major driver of the S&P 500 returns in recent years, but they may not be ready for the same outperformance this year, Cox said.
For example, in late January, tech stocks suffered a defeat amid concerns that Chinese artificial intelligence startups were attracting major US players. However, these strains have been recovering most of them ever since.
Overall, the rosy background of solid economic growth and consumer spending, coupled with relatively low unemployment rates, could push the S&P 500 up around 12% in 2025, Wren writes. It’s slightly better than the long-term historical average, he said.
“So don’t disappoint,” wrote Len. “I think investors should be optimistic.”
But investors shouldn’t let cloud judge high expectations about market risk, Cox said.
The current environment is one in which investors need to “prioritize portfolio balance” and long-term investors need to ensure that their portfolio aligns with their goals, she said.
