Can the S&P 500 Continue Soaring Higher After a Strong Q3? Here's What History Says.

The stock market continues to be on a tear in 2025. Although there was a slump earlier in the year due to President Trump's escalating trade war, stocks have more than recovered since bottoming in April. As of the end of September, the S&P 500 (SNPINDEX: ^GSPC) was up just under 14% year to date. This comes on the heels of two straight years of at least 20% gains for the index.

The S&P 500 includes the biggest companies in the U.S. market, and the most popular way to invest in it is through an exchange-traded fund (ETF), such as the SPDR S&P 500 ETF (NYSEMKT: SPY).

But as the index continues to hit new highs thanks to the very bullish hype behind artificial intelligence, many investors may worry whether the market is in a bubble. After climbing 85% in just the past three years, how long can this S&P 500 rally last?

Here's what history says could happen in the last quarter of the year.

Image source: Getty Images.

Is the S&P 500 set to extend its rally through the end of the year?

Looking at the data going back to 2000, there have been nine other times when the S&P 500 was up double digits by the end of September. I've summarized the results in the table below.

Data source: Google Finance. Calculations and table by author. YTD = year to date.

The good news for investors is that only in 2012 did the S&P 500 decline during the fourth quarter after being up at least 10% through Sept. 30. And even then, that was a nominal 1% decline in the last three months. Overall, stocks have generally fared well during the fourth quarter in years with strong existing rallies.

Overall, there were just two times (going back to 2000) where there was a double-digit decline in Q4, and those occurred in 2018 and 2008, when the index fell 14% and 23%, respectively.

Could this time be different?

The data going back to 2000 suggests the stock market should be in good shape and may continue to rise higher. But there are other factors besides historical trends to consider. Right now, the U.S. economy is facing a lot of uncertainty as new tariffs go into effect. In the past 20-plus years, tariffs haven't been much of a concern for investors.

Every year is different, and investors should consider the possibility that there could be some headwinds in the near future. As the SPDR S&P 500 ETF has climbed, so have the valuations of many of its top holdings. If you're near retirement or plan to withdraw a significant amount of cash from your portfolio within the next couple of years, it may not be a bad time to consider moving some of the funds you need into bonds or cash.

Should you be invested in the S&P 500 right now?

Investing in the SPDR ETF and other S&P 500 index funds is a good idea if you're investing for the long haul. While there may be a bad year or two in the near future, a long time horizon means the market should be able to recover (as it has in the past). Historically, the S&P 500 has averaged an annual return of around 10%.

However, that may not be a suitable approach for someone who will need to withdraw from their holdings in the near term and doesn't have the luxury of simply waiting for a recovery. If you fall into that category, it may be worth reducing your downside risk.

For all other investors, staying invested in the S&P 500 is still a great option, regardless of what may happen in the rest of 2025.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.