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.

The S&P 500 surged over 25% in the three months ending July 9, 2025, a rare historical event that has consistently preceded further gains, averaging 14% and 21% over the subsequent six and twelve months, respectively. However, this bullish historical precedent is significantly tempered by President Trump's trade and fiscal policies, with current tariffs at 18% (highest since 1934) and threats of further increases posing substantial downside risk through potential GDP slowdowns, inflationary pressures, and higher Treasury yields that could divert capital from equities.

Analysis

The S&P 500 has exhibited a historically significant technical signal, rallying 25.7% in the three-month period ending July 9, 2025. This rare event, occurring only five other times since 1950, has historically preceded further gains, with the index rising an average of 14% and 21% in the subsequent six and twelve months, respectively. However, this bullish precedent is directly challenged by considerable macroeconomic headwinds stemming from U.S. policy. Current tariffs have elevated the average tax on imports to 18%, the highest level since 1934, contributing to a one-percentage-point reduction in the 2025 GDP growth consensus. The market faces further downside risk from potential new tariffs on key trading partners including Canada, Mexico, and the European Union. Concurrently, expansive fiscal policy is projected to add approximately $3 trillion to the federal deficit over the next decade, which could exert upward pressure on Treasury yields and divert capital from equities. This fundamental uncertainty is reflected in recent market volatility, including a 19% drop followed by a rapid recovery, underscoring a sharp conflict between positive historical momentum and tangible, present-day policy risks.

Key Decisions for Investors

• Investors should weigh the bullish historical precedent of a +25% quarterly gain against the significant downside risks posed by uncertain trade and fiscal policies.
• Given the potential for policy-driven drawdowns, it is prudent to focus on high-conviction positions that can be held through periods of heightened volatility, rather than chasing momentum.
• Monitor developments in U.S. tariff finalizations for key trade partners and track movements in Treasury yields, as these will be critical indicators of the impact on corporate earnings and market sentiment.