Traders on the floor of the New York Stock Exchange at the opening bell in New York City on 12 February 2025.
Angela Weiss | AFP | Getty images
Stock market investors enjoyed elevated annual returns over the past two years. However, 2025 may not offer a “three-poll”, say investment analysts.
The S&P 500 stock market index yielded a return of 23% for investors in 2024 and 24% in 2023. Those returns were 25% and 26% respectively, respectively, respectively with dividends.
Three consecutive years of total returns of more than 20% for US shares is a historic rarity. According to Scott Wren, Senior Global Market stratist at the Wells Fargo Investment Institute, it only happened once – in the late nineties – dating from 1928.
“Do we expect an S&P 500 index three-level in 2025? In short, no,” Wren wrote in a market commentary on Wednesday.
Since 1926, the US stock market has achieved an average of about 10% annual efficiency, according to to Dimensional, an asset manager. After explaining inflation, shares consistently returned 6.5% to 7% per year dating to around 1800, according to an McKinsey analysis.
“We have been spoiled as investors for the past two years,” said Callie Cox, main market strategist at Ritholtz Wealth Management.
“Twenty percent profits have not been the norm,” said Cox. “Twenty percent profit is the exception.”
What can the party ruin?
Although history is ‘not a gospel’, there are reasons to think that the stock market may not perform so well in 2025, Cox said.
First of all, there are many uncertainties that the stock market, including rates and a potential rebound in inflation, can negatively influence, Wren said. A Surge in bond yields Could also form a headwind, Wren wrote in a market commentary. Higher yields can dampen the demand for US shares.
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Moreover, technology companies have been an important engine of S&P 500 returns in recent years, but may not be ready for the same outperformance this year, Cox said.
Tech Stocks suffered a route at the end of January, for example, in the midst of fear of a Chinese startup of artificial intelligence called Deepseek that undermines large American players. Those shares have since been largely recovered.
All in all, a rosy background of solid economic growth and consumer spending, in combination with relatively low unemployment, can push the S&P 500 in 2025, Wren wrote. That would be a little better than the historic average in the long term, he said.
“So don’t be disappointed,” Wren wrote. “We think that investors should be optimistic.”
However, investors should not leave high expectations of a cloud judgment on market risks, Cox said.
The current environment is one in which investors must “prioritize the balance between portfolios” and long -term investors must ensure that their portfolio is in accordance with their goals, she said.