Wall Street has delivered yet another strong year for investors. The S&P 500 is up 16% year to date, while the technology-heavy Nasdaq has returned 20.5%. The gains have swelled portfolio balances, resulting in the average investor’s 401(k) account at Fidelity reaching a record high of $144,400 at the end of September.
The returns haven’t come in a straight line. Far from it. The S&P 500 dropped 19% in the spring due to higher-than-expected tariffs and retreated 5.5% in November, raising questions about what could be in store for the final month of 2025.
There’s plenty of fodder for bulls and bears alike. Federal Reserve rate cuts and rapid AI advances are driving earnings growth, but tariffs are dragging on profits, and with the S&P 500’s P/E ratio flirting with 22, according to FactSet, valuations are arguably stretched.
Sam Stovall, CFRA’s chief investment strategist, appears unconcerned. Stovall has navigated the market for over 30 years, including as managing director and chief investment strategist at S&P Global and editor-in-chief at Argus Research, an independent investment research firm based in New York City. He believes the stock market is poised for a strong finish to 2025.
While the economy has some notable cracks, including rising unemployment and rebounding inflation, December is historically one of the best-performing months of the year, as holiday bonuses and end-of-year maneuvering help prop up markets.
Sam Stovall, CFRA Chief Strategist, recently updated his stock market outlook for December 2025.Bloomberg/Getty Images.
Stovall wrote in a CFRA research note shared with TheStreet:
Overall, since 1950, the S&P 500 and Nasdaq have increased by an average of 1.5% and 1.6%, respectively, in December, according to the Stock Trader’s Almanac. The Russell 2000 small-cap index does even better, returning an average of 2.3% in the month since 1979.
The excess return for small caps is pronounced enough to have earned it a name: the “January Effect.” According to the Stock Trader’s Almanac, small-cap…
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