A 20% S&P 500 ‘three-peat’ is unlikely in 2025, market strategist says

Stock market investors enjoyed lofty annual returns over the past two years. However, 2025 may not offer a “three-peat,” investment analysts say.

The S&P 500 stock market index yielded a 23% return for investors in 2024 and 24% in 2023. (Those returns were 25% and 26%, respectively, with dividends.)

Three consecutive years of total returns of more than 20% for U.S. stocks is a historical rarity. It has only happened once — in the late 1990s — dating back to 1928, according to Scott Wren, senior global market strategist at the Wells Fargo Investment Institute.

“Do we expect an S&P 500 Index three-peat in 2025? In short, no,” Wren wrote in a market commentary Wednesday.

The U.S. stock market has delivered average annual returns of roughly 10% since 1926, according to Dimensional, an asset manager. After accounting for inflation, stocks have consistently returned an average 6.5% to 7% per year dating to about 1800, according to a McKinsey analysis.

“We have been spoiled as investors” the past two years, said Callie Cox, chief market strategist at Ritholtz Wealth Management.

“Twenty-percent gains haven’t been the norm,” Cox said. “Twenty percent gains are the exception.”

While history “isn’t gospel,” there are reasons to think the stock market may not perform as well in 2025, Cox said.

For one, there are many uncertainties that could negatively impact the stock market, including tariffs and a potential rebound in inflation, Wren said. A surge in bond yields might also pose a headwind, Wren wrote in a market commentary. (Higher yields could dampen demand for U.S. stocks.)

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Additionally, technology companies have been a major driver of S&P 500 returns in recent years but may not be poised for the same outperformance this year, Cox said.

Tech stocks suffered a rout in late January, for example, amid fears of a Chinese artificial intelligence startup called DeepSeek undercutting major U.S. players. Those stocks have largely recovered since then, however.

In all, a rosy backdrop of solid economic growth and consumer spending, coupled with relatively low unemployment, may push the S&P 500 up by about 12% in 2025, Wren wrote. That would be slightly better than the long-term historical average, he said.

“So do not be disappointed,” Wren wrote. “We think investors should be optimistic.”

However, investors shouldn’t let high expectations cloud judgment about market risks, Cox said.  

The current environment is one in which investors should “prioritize portfolio balance” and long-term investors should ensure their portfolio is in line with their targets, she said.