LPL Research: Keys to Stock Market Gains in 2025

The stock market had a banner year in 2024. The S&P 500 rose over 20%, and for the second consecutive year. Gold and silver also rose over 20%. Bitcoin soared over 100%.

Volatility was low, with a maximum pullback of just 8.5%. That’s well under the average of 13% for the average decline. There are several reasons to suggest that the market may be more volatile in 2025, but could still continue higher.

Historically, a bull market that lasts two years has a strong chance to rally for a third year. The statistics are fairly strong, with only a recession or overly aggressive Federal Reserve breaking such a trend.

Given that odds of a recession remain low, this trend looks strong. Plus, the Fed is still on track for further cuts, not rate hikes. So far, so good.

In the third-year of a bull market, stocks tend to have positive returns most of the time. However, those returns are about 5.2% on average, well below the year 1 and year 2 returns. That suggests that 2025 will see markets trend higher, but not in a big way like in 2022 or 2023.

Overall, those returns could also be driven by a mid-year correction that sees a big pullback in stocks. Markets historically have a 10% correction every 12-18 months. Given the drop of only 8.5% in 2024, markets could be in for a deeper pullback amid a generally bullish year.

To see the full data on the third year of a bull market, click here.