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.
| Metric | Normal Year (1928-2023) | First Presidential Year | First Republican Presidential Year | Trump 2017 |
|---|---|---|---|---|
| Median Annual Return | +11.00% | +8.44% | -10.11% | +19.40% |
| Winning Annual Trades (%) | 67.37% | 58.33% | 36.36% | |
| Max Annual Gain | +48.02% | +48.02% | +30.65% | +19.40% |
| Max Annual Loss | -48.77% | -37.68% | -18.09% | 0.00% |
| Median Return (Inauguration-end Q1) | +1.68% | -4.99% | +0.08% | +4.20% |
| Winning trades (Inauguration-end Q1) | 63.54% | 50% | 54.55% |
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