The S&P 500 Has Been on a Tear. History Says the Rally Is Due for a Pause.

(Michael Nagle/Bloomberg)

Key Points

About This Summary

• The S&P 500 and Nasdaq Composite have logged nearly 30 new records each since the start of 2025, with recent gains of 4% and 6% respectively.
• DataTrek Research notes the S&P 500’s 20.3% gain over the past 100 days is unusual, with historical data suggesting a subsequent average gain of 3.7%.
• Analysts, including Goldman Sachs, anticipate a cooling market, with year-end S&P 500 targets implying modest gains for the fourth quarter.

There’s good news and bad news about the market rally. The good news is that it isn’t over. The bad news is that its blistering pace looks set to cool.

Certainly, that shouldn’t come as a shock, given that the S&P 500 and Nasdaq Composite, both off fresh highs, have logged nearly 30 new records apiece since the start of 2025. Over the past one-month period alone, investors in the S&P 500 are up some 4%, with the Nasdaq Composite up 6%; that’s far more than just sidestepping the September curse —and unsustainably high.

In fact, the S&P 500 “recently completed one of its strongest 100-day stretches in the last +15 years,” wrote DataTrek Research co-founder Nicholas Colas in a note published Tuesday, and history says the rally is likely due for a pause.

The index has notched a 5.5% gain over any given 100-day period since 2010, Colas writes, with a standard deviation of 7.8 percentage points. Movements beyond one or two standard deviations—the latter in this case being 21.2 percentage point— are outliers and statistically significant. The past 100 day period’s 20.3% gain–23% on Sept. 16–is therefore unusual, and the S&P 500 has only exceeded this level of returns over a 100-day period six times in the past 15 years, including the stretch from late August to last week**.**

That leaves a relatively small sample size to draw conclusions from, but looking at the five previous 100-day stretches, the average gain over the following 100 days was just 3.7%, or 1.3% excluding the postpandemic snapback in 2020.

Again, a 100% win rate is great news, but those numbers might look a little meager to investors who have gotten used to the recent higher returns. Moreover, it’s unlikely that the S&P 500 will see a 2020-style outsized rally, since the current market lacks that year’s aggressive interest rate cuts and fiscal stimulus.

Ultimately, Colas is still a bull. “We expect the S&P 500 to track the 2010 – present average over the next 100 days, generating a modest but still positive return,” he concludes. “We therefore remain positive on U.S. large cap stocks.”

Colas isn’t the only strategist who thinks that investors need to lower their expectations for the index going forward. Just last week, Goldman Sachs lifted its end-of-year S&P 500 price target by 200 points to 6,800–with the index trading not far below 6,700, implying a meager 1.8% gain for the fourth quarter. The index has advanced so rapidly that year-end targets that were raised just two months ago are below current levels.

Even optimists are expecting the year to end not with a bang, but a whimper.

UBS Chief Investment Officer and Head of U.S. Equities David Lefkowitz echoed a number of other voices on Thursday in noting that as long as earnings remain strong, valuation isn’t an obstacle to further upside —and said that the artificial intelligence is still going strong.

“[W]e would advise investors to lean into some of the seasonal strength that we typically experience in the last three months of the year,” he wrote. “S&P 500 returns tend to improve between October and December, and we believe this year will be no different.” Yet the firm’s year-end target still stands at 6600.

It’s understandable that analysts don’t want to be seen as chasing the market after having to up their price targets repeatedly throughout this year’s rally. Some may simply be looking to run out the clock on 2025, and introduce higher targets for next year.

In late August, RBC Capital Markets hinted it could see a 2026 target as high as 7200 for the index, which is Goldman Sachs’ current target, while UBS’s June 2026 target is 6800. The average 12-month target among analysts tracked by FactSet is 7332, implying about a 9.5% return.

Bull markets do tend to slow as they age, and with the S&P 500 on track to deliver a threepeat of double-digit returns in 2025, it’s already ahead of the average mid-single digit return for year three. A slowdown, even if a year late in historical terms, wouldn’t be surprising.

Of course, it’s easy to get spoiled after such a strong run. But investors can at least be grateful that stocks may be set to downshift, rather than slam on the brakes.

Write to Teresa Rivas at teresa.rivas@barrons.com