This year concludes with exceptional performance on Wall Street, driven by the S&P 500’s remarkable 23% gain, following a 24% rise in 2023—its strongest two-year rally since 1998.

In contrast, the MSCI indices, which track equities across regions and sectors outside the US, posted a modest 9% growth in 2024.

A Bullish Streak with a Historical Pattern

Despite the rally, investors remain cautious as historical patterns weigh heavily. Over the past two decades, Wall Street has typically experienced two to three years of bullish growth followed by a slowdown. If this trend holds, the key question is whether a pullback will occur in 2025 or 2026.

SPX

The primary concern for investors is whether stocks can sustain their momentum in a market that appears overvalued by many metrics. Notably, 2024 defied even the most optimistic projections, with analysts initially forecasting the SPX to end between 4,200 (J.P. Morgan) and 5,400 (Yardeni Research), with a median target of 5,000. Instead, the index surged past expectations, closing at 6,000—an 18% overperformance.

Challenges Loom for 2025

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Looking ahead, uncertainties surrounding fiscal policies, rising protectionism, and persistent inflation could challenge the market’s resilience. J.P. Morgan’s latest report predicts continued gains in 2025 but notes significant sectoral shifts.

The dominance of the so-called “Magnificent Seven” (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta Platforms) may wane, giving way to other growth drivers.

Drivers of the Bull Market

The past two years of robust market performance have been fueled by economic resilience, the Federal Reserve’s monetary easing, and the explosive growth of artificial intelligence. US equities have climbed nearly 60% during this period, reflecting a potent combination of innovation and policy support.

As Wall Street transitions into 2025, the optimism of recent years will be tempered by caution, with investors closely watching for signs of whether the next chapter will sustain the rally or bring a long-anticipated slowdown.

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.