The rest of 2025 - the bad news

Key points

• The first four months of 2025 appear likely to end with a stock market loss
• The first four months of the year have historically been something of a test for the market in the remaining eight months
• The market has historically performed much better during the last eight months of the year, when the first four months show a gain

When December through April shows a gain

For testing, we use the monthly closing price for the S&P 500 starting in 1950. Each year, we look to see if the S&P is higher or lower at the end of April than at the end of December the previous year. Then we look at the performance from April through December of this year, based on whether the market was higher or lower during the first four months of the year.

First, let's look at the years that saw a market gain during the first four months. The table below displays the S&P 500's performance from the end of April through the end of December only during years that showed a gain during the first four months.

The table below summarizes S&P 500 performance during the last eight months of the year if the first four months showed a gain.

The chart below displays the hypothetical growth of $1 invested in the S&P 500 only during the last eight months of the year, after the first four months showed a gain.

The chart below displays the same results using a logarithmic scale.

When December through April shows a loss

Now let's look at years that saw a market decline during the year's first four months (i.e., the S&P 500 Index closed April below where it was on the previous December 31st). The table below displays the S&P 500's performance from the end of April through the end of December only during years that showed a loss during the first four months.

The table below summarizes S&P 500 performance during the last eight months of the year if the first four months showed a loss.

The chart below displays the hypothetical growth of $1 invested in the S&P 500 only during the last eight months of the year, after the first four months showed a loss.

What the research tells us…

Does a decline for the S&P 500 Index through April doom the stock market to languish during the remaining eight months? Not necessarily, as year-to-year performance can vary widely. Nevertheless, the stock market has shown a clear tendency to perform better when January through April shows a gain (85% Win Rate and Median return of +8.2%) than when January through April shows a loss (46% Win Rate and -1.7% Median return). So, an S&P 500 decline during the first four months of 2025 suggests that investors may need to focus more on sector and/or stock allocations (rather than just holding an index fund) if they hope to prosper during the remainder of 2025.

Before giving in to pessimism, keep an eye out for an upcoming piece titled "The rest of 2025 - the good news."