After two straight years of gains, investors are questioning whether the market can maintain its upward trajectory.
Transcript:
CONWAY GITTENS: So the S&P 500 was up more than 24% in 2023, then up another 23% in 2024. What does that mean for the momentum in 2025? You mentioned this inability for a 3 peat. And I’m really thinking about this, especially given the fact that we have not had a meaningful correction since I don’t know when.
SAM STOVALL: Well you’re absolutely right. We did have two pullbacks last year. We had a 5.5% and an 8.5% decline. But Yeah meaningfully I think we needed something more like a 10 plus percent decline. But we didn’t necessarily need a new bear market. So nobody has repealed pullbacks corrections or bear markets. So we will get one. The real question is, will it be happening in the coming year.
One of the concerns I have is that traditionally third years of bull markets are pretty challenging of the 11 bull markets since World War two that celebrated their second birthday, three of them became new bear markets before the year was out, two more posted declines, even though not enough to become new bear markets. And then three additional ones ended up with returns of 6.5% or less. So a majority of those year twos were, in a sense unsuccessful. And so I think that there’s a good likelihood that we have a pretty challenging year 3 and we’re also starting the year with pretty stretched valuations in my opinion.
CONWAY GITTENS: 2024 was the year where the stock market almost went straight up, right. And so in 2025, what do you think we’ll see in terms of volatility. Will we see more of a choppy year?
SAM STOVALL: I think we probably will end up seeing more of a choppy year. Historically, the first and the third quarters are relatively flat in terms of price change, but obviously still maintaining that elevated level of volatility. The second and fourth quarters tend to be posting higher returns. Also, in the first year of a president’s term in office, we’ve had 90% of those years in which there was a decline of 5% or more, and many of them have been above 10% So I think volatility is something investors will have to get used to in the year ahead.
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