LPL: Another Big Up Year With A Sharp Drawdown

Another Strong Year for Stocks — Even With a Sharp Pullback

As 2025 winds toward the finish line, the stock market appears on track for another impressive year. With only 24 trading days left and the S&P 500 up roughly 14%, the backdrop remains supportive: companies just delivered one of the strongest earnings seasons in years, the large fiscal push from the One Big Beautiful Bill Act is set to begin after January 1, and seasonal trends typically favor stocks during the holiday stretch.

While no two years look exactly the same, one theme from 2025 fits a common market pattern — strong returns despite a sizeable correction along the way. At one point this year, the S&P 500 declined nearly 19%, yet it has still produced double-digit gains. Historically, this type of behavior is far from unusual. Since 1980, the average intra-year pullback has exceeded 14%, even as the index has averaged annual gains of more than 10%.

In other words, big drawdowns and big returns often go hand in hand. Investors who recognize this pattern are less likely to abandon their strategy during bouts of volatility.

Think of market swings as a toll investors pay for long-term growth. The 2025 experience reinforces this lesson once again.

Positive Years Still Dominate Market History

When annual returns are grouped together, a wider historical pattern becomes clear: stocks rise far more often than they fall.

Looking back to 1950, the S&P 500 (and its predecessor index) has posted declines of 25% or more only twice — in 1974 and 2008. Losses of more than 15% have occurred just five times, usually during periods tied to recessions, inflation spikes, financial crises, or sharp interest-rate shocks.

Remove those extreme exceptions, and the picture sharpens:

• The index has finished the year better than a 5% loss nearly 80% of the time.

• Annual gains have occurred roughly three out of every four years.

• Over rolling three-year periods, the S&P 500 has been higher 85% of the time.

• Over rolling 10-year periods, that number climbs to 92%, and that’s before including dividends.

The message is straightforward: the longer the time frame, the greater the likelihood of positive returns. Staying disciplined — even when volatility spikes — has historically been one of the most effective strategies for building wealth over time.

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