“The future ain’t what it used to be.” Yogi Berra, Hall of Fame Yankee Catcher
Yes, that’s an eye-catching title, but we do in fact continue to think a strong year-end rally is possible. For starters, the S&P 500 is up nearly 17% for the year as of October 27, so it isn’t like 20% is really all that far away. But of course, this would be the third year in a row with a 20% gain, something very few investors thought possible this time 36 months ago.
Later this week (on Friday) I’ll dive into November seasonality, but the truth is a good start to a year tends to see a strong final two months and we don’t think 2025 will be much different and another 20% year isn’t out of the question.
The Year-End Rally
Here are two studies that do little to change our opinion that the end of 2025 could go well for investors.
First up, when the S&P 500 is up more than 15% for the year after the first ten months, the last two months do really well. In fact, November and December do better than average and the two months combined have been higher an incredible 20 out of 21 times and up a very impressive 4.7% on average, which would get stocks up 20% on the year should it happen again. This month isn’t over, so we don’t know if we’ll be up 15% by the end of October, but should it happen, this bodes well for the bulls.
Secondly, assuming stocks are higher in October (a fairly safe bet right now), that will be six months in a row of gains. It turns out that has only happened three other times heading into November and sure enough, the returns the final two months were once again better than average. November has been higher each time and up more than 5% on average, but the final two months were higher each time as well and up 6.0% on average, nearly double the overall average return for the final two months of the year.
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Stocks historically bottom on October 27 and that kicks off the end of year rally period. I like to say that October’s job is to scare investors out of the year-end rally and it did a good job of that this year once again. From worries about the government shutdown, to private credit and regional bank issues, to escalating US/China trade issues, we saw it all in October and fear spiked. Sure enough, we are now in that late October sweet spot for a rally.
Here’s what post-election years look like, telling a similar story and another one for the bulls.
Lastly, our proprietary Carson Research Cycle Composite is also lined up nicely for the bulls.
This bull market continues to defy the odds of many a pundit, but not if you focus on facts, not feelings. If you are reading this then you know we’ve been expecting more new highs and a likely strong year-end rally. Thanks for reading and be sure to sign up for the special Facts vs Feelings livestream we have this Friday!
For more content by Ryan Detrick, Chief Market Strategist click here
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