History Suggests S&P 500 Could Struggle In 2025, But There's Reason For Optimism

Could 2025 mark a sluggish year for the S&P 500? Historical data suggests that investors may need to tread cautiously, especially given the patterns tied to the first year of a U.S. presidential term.

An analysis of market performance dating back to 1928 shows that the S&P 500’s average returns during the inaugural year of a presidency have lagged behind its typical performance—particularly under Republican administrations.

Historical Data Highlights First Year Struggles

The first year of a U.S. presidential term has historically been marked by volatility in the S&P 500 – as tracked by the SPDR S&P 500 ETF Trust SPY – with performance oscillating between striking gains and painful losses.

Data from Seasonax reveals that while the median return for the index in these years stands at 8.44%, the probability of positive performance—captured by a 58.33% winning ratio—barely tips the scales in favor of gains.

For comparison, in an average year since 1928, the S&P 500 has delivered a median return of 11%, with 67.37% of those years ending in positive territory.

“In year 1 of a US presidential cycle, the average SPX trend has tended to struggle from mid-January through April, rallied into the summer, and declined into year-end,” wrote Bank of America analyst Paul Ciana in a note published Monday.

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The Republican And Q1 Effects

The median return during Republican first years is -10.11%, and the winning ratio drops to 36.36%, highlighting the increased likelihood of losses.

The early months of a presidential year have also been tough for markets. From inauguration in late January to the end of March, the S&P 500’s median return is -0.09%, with gains recorded only 50% of the time.

Trump 2017: An Exception to the Rule

President-elect Donald Trump‘s first year in 2017 bucked these historical trends, delivering exceptional market performance.

From his inauguration to the end of March, the S&P 500 gained 4.2%, outperforming historical averages for both first presidential years and Republican presidencies. By year-end, the index had surged 19.40%, marking a robust first-year performance.

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