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

Key Points

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• The SP 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 SP 500s 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 SP 500 targets implying modest gains for the fourth quarter.
  
  Theres good news and bad news about the market rally. The good news is that it isnt over. The bad news is that its blistering pace looks set to cool.

  
  
  Certainly, that shouldnt come as a shock, given that the SP 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 SP 500 are up some 4%, with the Nasdaq Composite up 6%; thats far more than justsidesteppingtheSeptember curseand unsustainably high.

  In fact, the SP 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 deviationsthe latter in this case being 21.2 percentage point are outliers and statistically significant. The past 100 day periods 20.3% gain23% on Sept. 16is therefore unusual, and the SP 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, its unlikely that the SP 500 will see a 2020-style outsized rally, since the current market lacks that years aggressive interest rate cuts and fiscal stimulus.

  Ultimately, Colas is still a bull. We expect the SP 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 isnt the only strategist who thinks that investors need to lower their expectations for the index going forward. Just last week,Goldman Sachslifted its end-of-year SP 500price targetby 200 points to 6,800with the index trading not far below 6,700, implying a meager 1.8% gain for the fourth quarter. The index has advanced so rapidly thatyear-end targets that were raisedjust two months ago are below current levels.

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

  UBSChief Investment Officer and Head of U.S. Equities David Lefkowitz echoed a number of other voices on Thursday in noting thatas long as earnings remainstrong,valuation isnt an obstacletofurther upsideand 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. SP 500 returns tend to improve between October and December, and we believe this year will be no different. Yet the firms year-end target still stands at 6600.

  Its understandable that analysts dont want to be seen as chasing the market after having toup their price targetsrepeatedly throughout this years 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 a2026 target as high as 7200for the index, which is Goldman Sachs current target, while UBSs June 2026 target is 6800. The average 12-month target among analysts tracked byFactSetis 7332, implying about a 9.5% return.
  

  Bull marketsdo tend to slow as they age, and with the SP 500 on track to deliver a threepeat of double-digit returns in 2025, its alreadyahead of the average mid-single digit returnfor year three. A slowdown, even if a year late in historical terms, wouldnt be surprising.

  Of course, its 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.