Finance

The S&P 500 has returned three consecutive years of 20% gains just once since the 1920s.
The U.S. stock index delivered a 23% return in 2024 and 24% in 2023.
A backdrop of solid economic growth and consumer spending, coupled with relatively low unemployment, may push the S&P 500 up about 12% in 2025, market strategist says.

Traders on the floor of the New York Stock Exchange at the opening bell in New York City on Feb. 12, 2025. 
Angela Weiss | Afp | Getty Images

Stock market investors enjoyed lofty annual returns over the past two years. However, 2025 may not offer a “three-peat,” investment analysts say.
The S&P 500 stock market index yielded a 23% return for investors in 2024 and 24% in 2023. Those returns were 25% and 26%, respectively, with dividends.

Three consecutive years of total returns of more than 20% for U.S. stocks is a historical rarity. It has only happened once — in the late 1990s — dating back to 1928, according to Scott Wren, senior global market strategist at the Wells Fargo Investment Institute.
“Do we expect an S&P 500 Index three-peat in 2025? In short, no,” Wren wrote in a market commentary Wednesday.

The U.S. stock market has delivered average annual returns of roughly 10% since 1926, according to Dimensional, an asset manager. After accounting for inflation, stocks have consistently returned an average 6.5% to 7% per year dating to about 1800, according to a McKinsey analysis.
“We have been spoiled as investors” the past two years, said Callie Cox, chief market strategist at Ritholtz Wealth Management.
“Twenty-percent gains haven’t been the norm,” Cox said. “Twenty percent gains are the exception.”

What might ruin the party?

While history “isn’t gospel,” there are reasons to think the stock market may not perform as well in 2025, Cox said.
For one, there are many uncertainties that could negatively affect the stock market, including tariffs and a potential rebound in inflation, Wren said. A surge in bond yields might also pose a headwind, Wren wrote in a market commentary. Higher yields could dampen demand for U.S. stocks.
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Additionally, technology companies have been a major driver of S&P 500 returns in recent years but may not be poised for the same outperformance this year, Cox said.
Tech stocks suffered a rout in late January, for example, amid fears of a Chinese artificial intelligence startup called DeepSeek undercutting major U.S. players. Those stocks have largely recovered since then, however.

In all, a rosy backdrop of solid economic growth and consumer spending, coupled with relatively low unemployment, may push the S&P 500 up about 12% in 2025, Wren wrote. That would be slightly better than the long-term historical average, he said.
“So do not be disappointed,” Wren wrote. “We think investors should be optimistic.”
However, investors should not let high expectations cloud judgment about market risks, Cox said.  
The current environment is one in which investors should “prioritize portfolio balance” and long-term investors should ensure their portfolio is in line with their targets, she said. More

Jerome Powell’s press conferences—sometimes market-moving events—have attracted less notice of late. With Donald Trump in the White House, the chair of the Federal Reserve faces competition for attention. Yet a recent inflation reading has returned prices to the public eye. In January America’s “core” consumer price index, which strips out volatile food and energy costs, jumped by 5.5% at an annualised rate. In response, Larry Summers, a former treasury secretary, called this the “riskiest period for inflation policy since the early Biden administration”, after which inflation rose to its highest in four decades. More

Federal Reserve Governor Michelle Bowman said on Monday she wants to see data reflect more progress on inflation before cutting interest rates further. 
While she expects inflation to continue to decelerate this year, she said disinflation “may take longer than we would hope.” 
The Fed maintained its target rate at a range of 4.25% to 4.5% at its January policy meeting.

Federal Reserve Bank Governor Michelle Bowman gives her first public remarks as a Federal policymaker at an American Bankers Association conference In San Diego, California, February 11 2019.
Ann Saphir | Reuters

Federal Reserve Governor Michelle Bowman said on Monday that while monetary policy “is now in a good place,” she wants to see data reflect more progress on inflation before cutting interest rates further. 
“I would like to gain greater confidence that progress in lowering inflation will continue as we consider making further adjustments to the target range,” Bowman said in a speech at the American Bankers Association. 

Rising core goods price inflation since last spring has slowed progress, Bowman said. While she expects inflation to continue to decelerate this year, she said disinflation “may take longer than we would hope.” 
“I continue to see greater risks to price stability, especially while the labor market remains strong,”  Bowman said.
The most recent consumer price index showed inflation trended higher than expected in January, rising 0.5% month-over-month versus the Dow Jones estimate calling for a 0.3% rise. This put the annual inflation rate at 3%, coming in above consensus forecasts for 2.9%
The Fed maintained its target rate at a range of 4.25% to 4.5% at its January policy meeting.
Bowman said Monday the current level is appropriate for “allowing the Committee to be patient and pay closer attention to the inflation data as it evolves.”

“The current policy stance also provides the opportunity to review further indicators of economic activity and get further clarity on the administration’s policies and their effects on the economy,” continued Bowman.
President Donald Trump’s tariffs against the U.S.’s largest trading partners have raised concerns among economists of higher prices. Expectations for further interest rate cuts in 2025 have weakened on Trump’s trade war. Traders are currently pricing in just a single quarter-percentage-point rate reduction this year, according to CME Group Data.  More

Among all the hurdles you face in trying to beat the market, maybe none is as great as yourself, says index investing pioneer Charley Ellis.
He addressed many of the biases that hold investors back, including the gambler’s fallacy and the herd mentality, on a recent CNBC “ETF Edge” appearance.

Index investing pioneer Charley Ellis says what gave rise to the success of the index fund remains true today: “It’s virtually impossible to beat the market,” he told CNBC’s Bob Pisani on last Monday’s “ETF Edge.”
But Ellis warns of another hurdle just as high as active management’s long-term underperformance that holds back many investors: You might be your own worst enemy when it comes to your investment strategy. 

The market’s complexities, volatility and an infinite number of other variables can cause unpredictable price fluctuations, but your own mindset is just as key among the variables that can set your financial portfolio back.
In his new book, “Rethinking Investing,” Ellis details a slew of unconscious biases that impact our thinking about money in the market. A few of the big ones he addresses in the book:

The gambler’s fallacy: The belief that because you were right picking one stock, you will be right picking all other stocks.
Confirmation bias: Seeking information that confirms pre-existing beliefs.
Herd mentality: Blindly following actions of a larger group.
Sunk cost fallacy: Continuing to invest in failing investments.
Availability: Being influenced by easily accessible information, whether it is actually valuable or not.

The impacts of these biases on your portfolio strategy can be major, Ellis says, and should lead investors to “rethink” their approach to the market.
“Instead of trying to get more, try to pay less,” he said. “That’s why ETFs … have made such great sense.”

More from ETF Edge

Research shows that ETFs typically have lower fees than traditional actively managed mutual funds, though traditional index mutual funds such as S&P 500 funds from Vanguard and Fidelity are also have ultra-low fees (some are even management fee-free). 

Ellis argues that use of lower fee funds, combined with letting go of our behavioral biases, can help investors win years, or even decades, later. 
“They’re boring, so we leave them alone, and they do work out over the long run, very, very handsomely,” he said. 
Long-time ETF expert Dave Nadig, who appeared on “ETF Edge” with Ellis, agreed. 
“People trying to predict people always works out terribly,” Nadig said. A long-term investment in an index fund “helps you overcome an enormous number of these biases simply because you’ll pay less attention to it,” he added. 
He also pointed to the mistake many investors make of trying to beat the market by timing it, only to end up outsmarting themselves. “There are more good days than bad days,” Nadig said. “If you’re missing the 10 best days in the market and you missed the worst 10 days in the market, you’re still much worse off than if you just stayed invested. The math on that’s pretty hard to argue with.”
One more mindset shift tip Ellis offered on this past week’s “ETF Edge” for investors focused on having enough invested for a secure retirement: Start thinking about the income stream from Social Security in a new way.
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The first proper winter in three years had already reignited energy debates. With temperatures frigid and Asian competition for supplies fierce, the spot price at the Dutch Transfer Title Facility (TTF), Europe’s gas-trading hub, hit €58 ($61) per megawatt hour (MWh) on February 10th, its highest in two years (see chart). Then, on February 12th, came Donald Trump’s announcement that negotiations over an end to Russia’s war in Ukraine would start “immediately”—a statement that financial markets appear to be taking seriously. More

The steady stream of income from Social Security should be factored into an investor’s asset allocation strategy but typically is not, index fund pioneer Charley Ellis told CNBC’s Bob Pisani on this week’s “ETF Edge.”

Based on a lot of the recent dire headlines, many Americans may have come to think of Social Security as an asset that is going to disappear from their financial future rather than be part of it, but it may be a bigger factor in portfolio success than it gets credit for, according to investing legend Charles Ellis.
The steady stream of income provided by Social Security can influence asset allocation decisions that improve overall performance, says Ellis, who has written many books on investing and helped to pioneer the index fund space.

“We don’t talk about it. We don’t measure it. We don’t quantify it. But it’s a substantial asset,” Ellis told CNBC’s Bob Pisani on “ETF Edge” this week.
He argues Social Security functions similarly to an inflation-protected bond. Yet, it is rarely factored into investor asset allocation plans.
Overlooking Social Security can be a big mistake, said Ellis, whose books on finance include “Winning the Loser’s Game,” and whose new book is “Rethinking Investing – A Very Short Guide to Very Long-Term Investing.”

More from ETF Edge

“Be very surprised if you don’t have something on the order of $250[000] to $350,000 coming your way through the Social Security program,” Ellis said on “ETF Edge.”
Failing to recognize this can lead to overly cautious investing, he added.

The S&P 500 has averaged around 12% annual returns since 1928, according to New York University Stern. The U.S. 10 Year Treasury has returned just about 5% over the same time period.
Ellis says Social Security’s steady income stream allows for greater stock exposure.
“Almost anybody looking at the reason for holding bonds talks about the desire to reduce the fluctuations,” he said.
He gave the example of an inheritance that an adult child expects as a parallel thought experiment. “If you have wealthy parents that are going to give you an inheritance in the future, any of those things that you really know are valued, why not include them in your thinking so that you won’t overweight yourself in fixed income?”
“Why not include [Social Security] in your thinking?” Ellis said.
Disclaimer More

Economists expect the U.S. dollar to strengthen further against foreign currencies in 2025 due to President Donald Trump’s tariff policy.
That would give travelers who are going abroad more buying power.
Interest rates play a big role in currency moves with developed nations like the United Kingdom and European countries, economists said.

A customer at a food market in Palma, Mallorca, Spain.
Andrey Rudakov/Bloomberg via Getty Images

As economists ring alarm bells over the impact of President Donald Trump’s tariff policy on consumers and the U.S. economy, there’s a group of Americans who may benefit: tourists traveling abroad.
That’s due to the impact of tariffs on the U.S. dollar and other global currencies. Economists expect tariffs imposed on foreign imports to strengthen the U.S. dollar and potentially weaken major currencies like the euro.

In such a case, travelers would have more buying power overseas in 2025, economists said. Their dollar would stretch further on purchases like lodging, dining out and guided tours that are denominated in the local currency.
“Tariffs, all else equal, are good for the U.S. dollar,” said James Reilly, senior markets economist at Capital Economics.

The U.S. dollar has risen amid tariff threats

The Nominal Broad U.S. Dollar Index in January hit its highest monthly level on record, dating to at least 2006. The index gauges the dollar’s strength against currencies of the U.S.’ main trading partners, like the euro, Canadian dollar and Japanese yen.
Meanwhile, the ICE U.S. Dollar Index (DXY) – another popular measure of the strength of the U.S. dollar – is up more than 3% since Trump’s election day win.
Trump on Thursday laid out a plan to impose retaliatory tariffs against trading partners on a country-by-country basis. Specific levies will depend on the outcome of a Commerce Department review, which officials expect to be completed by April 1.

Meanwhile, Trump has imposed an additional 10% tariff on Chinese goods. A 25% duty on all steel and aluminum imports is set to take effect March 4. Further, a 25% tariff on Canada and Mexico may take force in March, after being paused for 30 days.
The Canadian dollar offers a recent example of the potential impact of a tariff, Reilly said.
On Feb. 4, when the Canadian tariffs were set to take effect, the U.S. dollar spiked to its highest level in at least a decade against the Canadian dollar, before eventually falling back when Trump delayed the duties for a month.
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A trade war with China in 2018-19 during Trump’s first term also offers insight into the impact of tariffs on currencies, J.P. Morgan global market strategists wrote in October.
The Trump administration raised tariffs on about $370 billion of Chinese goods from an average of 3% to 19% during 2018-19, and China retaliated by raising tariffs on U.S. exports from 7% to 21%, the J.P. Morgan strategists wrote.
While other factors also influenced currency moves, trade policy uncertainty “tended to bolster the dollar,” J.P. Morgan reported. The DXY index rose up to 10% during tariff announcement windows in 2018 and 4% in 2019, they wrote.

Why tariffs are good for the U.S. dollar

Tariffs — even the threat of them — can bolster the dollar relative to other currencies in a few ways, Reilly explained.
One key way is via interest rates — specifically, the differential between one nation’s interest rates and another, he said.
Tariffs are generally viewed as inflationary, since the import duties are expected to raise consumer prices, at least in the short term, economists said.

The Federal Reserve would likely keep interest rates elevated to keep a lid on U.S. inflation, which hasn’t yet fallen back to policymakers’ target level after soaring in the pandemic era.
“We expect the USD [U.S. dollar] to remain strong in the short term, mostly on the back of US inflationary policies and particularly tariffs,” Bank of America currency analysts wrote in a note Friday.
(Their analysis was of “G10” nations: Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, Sweden, Switzerland, the United Kingdom and U.S.)
Based on available information around Trump’s retaliatory tariff plan, the average effective tariff rate on all U.S. imports would rise from less than 3% now to around 20% — which would add about 2% to U.S. consumer prices and temporarily boost inflation to 4% in 2025, Paul Ashworth, chief North America Economist at Capital Economics, estimated Thursday.

On the flip side, other nations’ economies would likely suffer from the U.S. levies, Reilly said.
Take Europe, for example.
Europe might export less to the U.S. as a result, which would negatively impact the European economy, he said. That would make it more likely for the European Central Bank to cut interest rates in order to bolster the economy, Reilly said.
A wider interest-rate differential would result from elevated U.S. interest rates and lower European rates.
Such a dynamic would likely lead investors to move money into U.S. assets — perhaps U.S. Treasury bonds, for example — to seek a higher relative return, causing them to sell euro-denominated assets in favor of dollar-denominated assets, Reilly said.
In this case, higher demand for the U.S. dollar and lower demand for the euro may lead to a stronger dollar, he said.
The euro and British pound sterling are especially sensitive to such interest-rate differentials, while emerging-market currencies are less so, Reilly said.

Will the dollar weaken later in the year?

Of course, there’s considerable uncertainty over how the U.S. would apply tariffs on other nations — and whether levies that have been proposed would even take effect. Retaliatory tariffs from trading partners could blunt a runup in the U.S. dollar, economists said.
The dollar could weaken later in the year if the world retaliates against the U.S. and these trade policies “take a toll on the U.S. economy,” Bank of America analysts wrote.
Indeed, most investors expect the U.S. dollar’s strength to peak in the first or second quarter of 2025 — 45% and 24%, respectively, according to a Bank of America survey conducted from Feb. 7 to Feb. 12. (The poll was of 52 fund managers from the U.K., Continental Europe, Asia and the U.S.)
However, in general, most countries are more dependent on the U.S. than the U.S. is on them for trade, Reilly said.
“So they can’t really retaliate to the same extent the U.S. can,” he said. More

DaVita saw shares tumbling Friday after issuing a weak outlook amid rising care costs, while big investor Berkshire Hathaway offloaded some shares in a preplanned agreement.
The disappointing guidance underlined increasing patient care costs due to center closure costs and health benefit expenses.

Traders work on the floor of the New York Stock Exchange on Feb. 13, 2025. 

DaVita, a company that provides dialysis services, saw shares tumbling Friday after issuing a weak outlook amid rising care costs, while big investor Berkshire Hathaway offloaded some shares in a preplanned agreement.
The health-care stock fell more than 12% Friday. The Colorado-based company said it expects its 2025 adjusted profit per share to be between $10.20 and $11.30, compared to analysts’ average expectation of $11.24 per share, according to LSEG.

The disappointing guidance underlined increasing patient care costs due to center closure costs and health benefit expenses. In the fourth quarter, the company incurred charges for closures of its dialysis centers in the U.S. totaling $24.2 million.
Still, DaVita’s fourth-quarter earnings of $2.24 per share on an adjusted basis topped analysts’ estimates of $2.13 per share per LSEG.

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Separately, DaVita’s largest institutional investor Berkshire Hathaway sold 203,091 shares on Tuesday to reduce its stake to 45%, worth nearly $6.4 billion, a regulatory filing Thursday night showed.
The sale was part of a share repurchase agreement the two parties reached back in April. DaVita agreed  to buy back shares to reduce Berkshire’s ownership stake to 45% on a quarterly basis.
Warren Buffett’s conglomerate first invested in DaVita in 2011. As of the end of September, DaVita was Berkshire’s 10th largest equity holding.

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