2024 was full of surprises, all to the upside for markets. The S&P 500 notched more than 55 record highs – the fifth most in a year on record, a trend that has continued into 2025. Last year also marked the second consecutive year of 20%-plus gains for the S&P 500, the first time this has occurred since the late 1990s and just the 9th time since 1950. In 6 of those instances, the market has continued its rally into the third year, generating an average return of 12%. The thought of another double-digit gain sounds too good to be true, and maybe it is, but, is it outlandish? It is worth noting, the average bull market lasts just over five years, and we are a little over two years into this one. Since its trough, the S&P has gained roughly 70%, which pales in comparison to the average bull market, which delivers average gains of 180%. This does not mean we will see another 65% gain from here in the next 3 years…but we could…

Many have been clamoring for the end of this bull run for 2 years, and they were not alone. In fact, not one Wall Street firm came close to predicting the level of the S&P at the end of the year, as they were all too low. The sharp slowdown in growth, or even recession, did not come true. Inflation’s progress stalled, the Fed drastically shifted its rate cut schedule to only 2 cuts, and we had a contentious election that all provided plenty of opportunities for the market to falter. Yet, the market remained strong. The S&P 500 finished the year up over 23%, the Nasdaq gained 30%, and Dow Jones rose 15%. Once again, the market was bolstered by the jump in technology stocks, buoyed by optimism surrounding artificial intelligence and corporate earnings. Despite rates staying elevated, the labor market remains resilient, with unemployment still below 4%, though wage growth has moderated. The performance has carried over with the market up 4% to start the year, which could bode profitable for equity investors. The January Barometer follows the idea that the stock market’s performance in January can predict how the market will perform the rest of the year. Since 1945, when the S&P has finished January in positive territory, stocks have ended the year higher 86% of the time with an average gain of 16.2% during those years. (Keep in mind, stocks have finished up 71% of the time looking at all years with an average return of 9.2%.)

As is typical, there are plenty of threats still looming. Market concentration in mega-cap stocks is as high as ever, with the S&P’s heavy reliance on the “Magnificent Seven” tech giants ballooning to over 32% of the index. Disruption in the tech sector could disproportionately impact the broader market. For example, news of DeepSeek’s “discovery” as a cheaper alternative for AI development triggered a sharp 17% single-day decline in NVDA. Naturally, the largest component of the S&P plummeting sent the “market” with it as the Nasdaq fell over 3% and S&P over 1.5%. Though this selloff was short-lived, it shows the impact one of the tech darlings now has on the S&P. Furthermore, the new administration has threatened the use of tariffs on foreign nations, raising concerns of potential trade wars. Such measures could lead to higher prices and retaliatory actions from trade partners, introducing more volatility into the system in the short term. As mentioned earlier, inflation still rears its head as the Fed has expressed diminished confidence in inflation reaching its 2% target soon. Expectations for rate cuts have fallen and investors are coming to terms with the possibility of rates staying higher for longer. Though the economy has held up much better than anticipated, the elevated rate environment continues to take its toll and eventually could lead to “cracks” in the system. It goes without mentioning, but geopolitics still have the ability to escalate as the whole world continues to walk on eggshells.

January 3rd marked the three-year anniversary since the peak before the 2022 bear market. The S&P 500 would go on to decline 25% (on the back of the Russia/Ukraine war, surging inflation, and the onset of Fed tightening) before bottoming ten months later. Despite the decline, the S&P 500 is up 8.7% on an annualized basis (or 28% cumulatively) and has notched 57 record highs since that date. The point is, while volatility is never comfortable for investors, staying invested remains important for long-term returns! Inevitably, whether in the near or distant future, the market will swing the other way. Keeping long-term perspective is key through it all.

John Webb 

Private Wealth Advisor 
Pinnacle Asset Management
Raymond James Financial Services 

Kidd Private Wealth Group