With just 24 trading days left in 2025 and the S&P 500 up about 14%, a strong year for stocks appears highly likely. If you are skeptical, consider that we’re coming out of one of the best earnings seasons in years by the numbers, the fiscal stimulus from the One Big Beautiful Bill Act (OBBBA) that kicks in after New Year’s is fast approaching, and the holidays are typically favorable for stocks from a seasonal perspective.
Of course, every year is different, but one element of the path for stocks this year that is quite common is the fact that stocks suffered a correction on the way to strong gains. As you can see in the “It’s Not Over Yet, But 2025 Looks Like Another Year of Big Gains and a Large Drawdown” chart, the S&P 500 experienced a drawdown of 18.9% this year but is actually up more than 13% for the year. This pattern is not uncommon, as the chart illustrates. In fact, the average drawdown in a given calendar year has been over 14% since 1980, while the S&P 500 has gained an average of 10.7% per year during that time. Double-digit intra-year declines often come with double-digit annual gains, one of the most powerful messages in investing. It’s easy to get scared out of the market when volatility arrives, so those investors who keep this pattern in mind should be more confident holding on through the tough times.
Volatility is like a toll that investors pay on the road to attractive long-term returns. This year offers us this powerful lesson once again.
It’s Not Over Yet, But 2025 Looks Like Another Year of Big Gains and a Large Drawdown
Positive Years Dominate Stock Market History
Jeff Buchbinder, CFA, provides the top-down view of the stock market for LPL Financial Research. He has over 25 years of experience in equities.
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