The S&P 500 Is Roaring by Record Highs. History Says the Stock Market Will Do This Next.

Key Points

• The S&P 500 has advanced 10% year to date despite economic headwinds, slightly more than its return of 9.3% annually over the last four decades.

• The S&P 500 has dropped in 6 of the last 10 Septembers, declining by an average of 2%, which makes it the worst month of the year for U.S. stocks.

• The S&P 500 has a median year-end target of 6,500 among 18 Wall Street analysts, which implies 1% upside from its current level of 6,466.

• 10 stocks we like better than S&P 500 Index ›

The S&P 500 (SNPINDEX: ^GSPC) has added 10% year to date as of Sept. 5, rocketing by 21 record highs in the process. Those gains are particularly astonishing because tariffs imposed by President Trump have rattled Wall Street and created economic uncertainty.

However, history says investors should expect very little upside (if any) in the remaining months of the year. The S&P 500 tends to fall in September, and most analysts expect the index to trade sideways through December. Here are the important details.

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Image source: Getty Images.

The S&P 500 returned 9.3% annually over the last 40 years

The S&P 500 measures the performance of 500 large U.S. companies that cover about 80% of domestic equities and 40% of global equities as measured by market value. The index is widely considered the best barometer for the entire U.S. stock market due to its scope. The top 10 holdings are listed by weight below:

1. Nvidia: 7.5%
2. Microsoft: 6.8%
3. Apple: 6.5%
4. Alphabet: 4.4%
5. Amazon: 4%
6. Meta Platforms: 2.9%
7. Broadcom: 2.6%
8. Tesla: 1.7%
9. Berkshire Hathaway: 1.6%
10. JPMorgan Chase: 1.5%

The S&P 500 advanced 3,350% during the last four decades, excluding dividends, which is the same as 9.3% annually. That does not mean the index has returned 9.3% in every year, but rather that it has advanced at a rate equivalent to 9.3% per year in the last 40 years. In other words, history says the S&P 500 is unlikely to move any higher this year because it has already gained 10%.

Additionally, history says the S&P 500 is likely to drop in the near term because September has usually been the worst month for U.S. stocks. The index dropped in 6 of the last 10 Septembers, falling by an average of 2%. Analysts explain that phenomenon, called the September Effect, in different ways. Some attribute it to simple psychology, while others point to a decrease in discretionary spending as summer vacations end. Either way, history says the S&P 500 is likely to fall this month.

Wall Street analysts have waffled on their year-end forecasts for the S&P 500

In January, the S&P 500's median year-end target was 6,600 among analysts at 18 investment banks and research organizations. That figure was initially revised down to 5,900 in May as President Trump started imposing tariffs but has since been revised upward to account for strong corporate earnings, which have notched double-digit increases in three straight quarters.

The chart below shows the current year-end targets on the S&P 500 set by 18 Wall Street analysts. It also shows the implied upside (or downside) versus the index's current level of 6,466.

Data source: Yahoo Finance, Reuters, Stifel.

As shown above, the S&P 500 has a median year-end target of 6,500 among 18 analysts. That implies 1% upside from its current level, meaning Wall Street essentially expects the index to trade sideways in the remaining months of the year.

Here's the bottom line: The S&P 500 has already achieved solid returns in 2025, and most Wall Street analysts expect little change through December. Personally, I think investors should brace for volatility because weak, nonfarm payroll numbers suggest tariffs are taking a toll on the economy, and whether those tariffs are even legal is currently up for debate.

Investors need not avoid the stock market. But they should limit purchases to their highest conviction stocks and only when the valuation is sensible. Additionally, now is a good time for investors to accumulate some extra cash in their portfolios.

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Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Goldman Sachs Group, JPMorgan Chase, Jefferies Financial Group, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Barclays Plc and Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.