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December 31, 2024 | Ryan Maher, Senior Performance Analyst

This week’s chart details each calendar year return for the S&P 500 Index dating back to 1928, with consecutive 20%+ returns highlighted in orange. Despite a slight pullback over the last few weeks, the index posted a return of more than 20% in 2024, which represents only the fifth time in history that the benchmark has recorded such a figure in consecutive years (note that the five straight years of 20%+ returns in the 1990s are counted as one instance). As investors look ahead to 2025 and beyond, many are asking the following question: How have markets performed after such strong periods?

In the years following the first three of these instances (1937, 1956, and 1984), the S&P 500 Index notched a significantly lower return, with an average of -1.1%. Interestingly, each of these years was marked by either tighter monetary policy, inflation, decreased industrial production, higher unemployment, or some combination of these trends. As mentioned above, the late 1990s saw a staggering five consecutive years of 20%+ returns for the S&P 500 Index, fueled by a boom in investor interest in e-commerce, software, and telecommunications companies. The so-called “Dot-Com Bubble” led to widespread speculation related to unprofitable companies and a rapid expansion in market valuations, and the bursting of this bubble caused the S&P 500 Index to decline sharply in the first three years of the new millennium.

In the last two years, performance of the S&P 500 index has been largely driven by investor interest in artificial intelligence and the Information Technology sector. The Magnificent Seven stocks (Apple, Microsoft, Amazon, Alphabet, NVIDIA, Meta, and Tesla) have led the charge, accounting for over 50% of the total return for the benchmark since the beginning of 2023. As artificial intelligence becomes increasingly integrated into the global economy, these and other similar companies are expected to attract more investment and drive additional index returns. While there are some similarities between the current environment and the Dot-Com Bubble, the U.S. economy continues to show resilience and most of the winners from the last two years are well-established businesses with healthy profits. Still, history has shown us that periods of robust equity market performance do not continue forever. As the calendar changes to 2025, investors should keep this idea in mind as it relates to expectations for near-term stock returns.

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