Wells Fargo predicts S&P 500 won't see a three-peat of 20% gains in 2025

As of February 13, 2025, the S&P 500 has experienced two consecutive years of impressive growth, each marked by gains exceeding 20%. This remarkable trend has led analysts and strategists to speculate about the possibility of a historical third consecutive year of such gains. However, Wells Fargo, under the guidance of senior global market strategist Scott Wren, has cautioned against such optimism. They note the rarity of achieving three successive years of such substantial growth in the stock market's history, highlighting that it has only happened once before during the economic boom of the 1990s. During the historic bull market of the 1990s, the S&P 500 enjoyed an unparalleled four consecutive years of significant returns, with notable gains including over 34% in 1995, 20% in 1996, 31% in 1997, and 26% in 1998. This was followed by a nearly 20% gain in 1999 before the dot-com bubble burst the following year. Given these historical precedents, Wren suggests that while the S&P 500 has seen encouraging performance, expecting a 'three-peat' of 20% gains is unrealistic for 2025. Despite this cautious outlook regarding consecutive years of exceptional performance, Wren has emphasized the potential for a strong market year in 2025. He predicts that strong economic growth could drive the S&P 500 to an end-of-year value of 6,600, representing a projected 12% increase from the closing value at the end of December 2024. He remains optimistic, particularly regarding growth and value stocks, while advising investors to steer clear of defensive sectors that typically underperform in a growth-driven market. In sum, while the prospect of achieving a third consecutive year with more than 20% gains appears minimal, Wells Fargo's assessment encourages a measured optimism, suggesting that well-positioned portfolios could see positive outcomes in the coming year, albeit without the historical precedence of consecutive massive gains.