The Stock Market Has Only Done This 6 Times Since 1950. History Says It Signals a Big Move in the S&P 500 This Year.

Key Points

• The S&P 500 returned more than 25% during the three-month period that ended on July 9, something it has only done five other times since 1950.

• The S&P 500 following three-month returns exceeding 25% has always increased in the next six months, returning an average of 14% during that period.

• President Trump's trade and fiscal policies represent downside risk to the stock market, especially because tariffs rates have not yet been finalized.

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The S&P 500 (SNPINDEX: ^GSPC) yo-yoed as the Trump administration waivered on trade policy in the first half of 2025. The index crashed after the president unveiled sweeping "Liberation Day" tariffs, closing 19% below its record high on April 8. However, it promptly reversed course when the president issued a 90-day pause on the most severe tariffs days later, blowing through a series of historic milestones.

• The S&P 500 advanced 19.6% during the 27-day period that ended on May 16. That was its sixth best 27-day performance in history.
• The S&P 500 advanced 6.2% in May. That was its best performance during the month since 1990 and its second best May in history.
• The S&P 500 advanced 20.5% during the two-month period that ended on June 9. That was its sixth best two-month performance in history.

Well, the S&P 500 recently rocketed through another historic milestone. The index gained 25.7% during the three-month period that ended on July 9. The S&P 500 has only advanced more than 25% in three months five other times since 1950. Those incidents have always preceded more upside in the next six months and 12 months.

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Here's what investors should know.

Image source: Getty Images.

History says the S&P 500 is headed higher in the remaining months of 2025

The S&P 500 is widely considered the best barometer for the U.S. stock market because it includes 500 large-cap companies that collectively represent more than 80% of domestic equities by market capitalization. The index has existed in its current form since 1957, but the selection methodology can be applied further back to generate hypothetical data.

Carson Investment Research analyzed data going back to 1950 and arrived at the following conclusion: The S&P 500 has only returned more than 25% during a three-month period six times. The most recent incident was the three-month period that ended on July 9, 2025. So, we can examine the previous five incidents to make an educated guess about how stocks might perform in the coming months.

Data source: Carson Investment Research.

As shown above, the S&P 500 following a three-month gain above 25% has always moved higher during the next six months and 12 months. Moreover, the index returned an average of 14% over the next six months and 21% over the next 12 months.

With that in mind, the S&P 500 closed at 6,263 on July 9 and essentially trades at the same level today. The index will advanced 14% to 7,140 by January 2026 if its performance aligns with the historical average. It will also advance 21% to 7,578 by July 2026 if its performance matches the historical average.

Of course, past performance is never a guarantee of future returns, and no stock market forecasting tool is infallible. How the S&P 500 actually performs in the coming months depends entirely on corporate earnings and stock market sentiment, both of which are influenced by macroeconomic fundamentals like gross domestic product (GDP), inflation, and Treasury yields.

President Trump's trade and fiscal policies still present a risk to the stock market

The tariffs imposed to date have increased the average tax on U.S. imports to 18%, the highest level since 1934, according to the Budget Lab at Yale University. The consensus estimate for 2025 GDP growth has already fallen by a percentage point since President Trump took office, but the reality may be even worse because he has yet to finalize tariff rates for many countries.

Indeed, Trump over the weekend threatened a 35% tariff on Canadian imports, and 30% tariffs on European and Mexican imports. Those levies would be likely to put significant upward pressure on consumer prices and further slow GDP growth because the European Union (as a single entity), Mexico, and Canada are the three largest U.S. trade partners.

Meanwhile, the One, Big, Beautiful Bill that narrowly passed Congress this month will add about $3 trillion to the federal deficit in the next decade, according to several independent economists. Greater deficit spending means investors are more likely to question whether the U.S. can meet its debt obligations, in which case they would demand higher rates on Treasury bonds.

Here's the bottom line: Experts expect the tariffs imposed to date to be a meaningful drag on GDP, and the actual impact could be worse than anticipated if President Trump follows through on recent threats. Slower economic growth will be a headwind to earnings across the S&P 500, which would drag stock prices down. Meanwhile, higher Treasury yields could siphon more money away from the stock market.

So investors should tread carefully in the coming months. That does not mean avoid the stock market entirely, but rather don't buy any stock you aren't prepared to hold through a significant drawdown.

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Trevor Jennewine 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.