The stock market is on the cusp of a remarkable feat in 2024. If the S&P 500 finishes the year up over 20%, it will mark only the seventh time in four distinct periods over the past century that the index has seen back-to-back years of such impressive gains. In 1927 and 1928, the market rose 31% and 38%.
The index also saw consecutive years of 20%-plus gains in 1935 and 1936, 1954 and 1955, and from 1995 to 1998. However, history offers mixed signals about what happens next after two years of soaring returns. Following the gains in 1927 and 1928, the market fell 12% in 1929, ushering in the Great Depression.
The index would plummet 90% over the next three years. The market also experienced a sharp downturn after posting strong gains in 1935 and 1936, falling nearly 40% the following year. The 1930s proved to be a tumultuous decade for investors and the American economy.
In contrast, after the bull market of 1954 and 1955, the index eked out a modest 3% gain the next year. It would take another four decades before the market saw back-to-back years of 20% gains again.
S&P 500’s historical streak analysis
From 1995 to 1998, the S&P 500 enjoyed a remarkable run, posting gains of 34%, 20%, 31%, and 26%. The streak nearly extended to a fifth year in 1999 with a 19.5% return, but the market finally crashed in 2000 as the Dot-Com bubble burst. The index suffered three consecutive years of losses from 2000 to 2002.
As investors look ahead to 2025, most Wall Street analysts expect the S&P 500 to notch another double-digit percentage gain, though opinions are split on whether it will exceed 20%. Favorable market conditions, such as cooling inflation and a robust labor market, support a positive outlook. Goldman Sachs projects U.S. GDP growth of 2.5% next year, and President-elect Donald Trump is expected to enact pro-growth policies like corporate tax cuts.
Nevertheless, various factors could derail the market’s upward trajectory. Geopolitical tensions, trade disputes, reignited inflation, rising interest rates, a potential recession, and fiscal concerns could all impact the market’s performance. While the market could continue its impressive run, as it did in the late 1990s, history demonstrates the difficulty of predicting market movements after two years of strong gains.
The only somewhat reliable trend is the long-term upward march of the S&P 500. As 2025 approaches, investors should remain vigilant and prepared for a range of potential scenarios.
