Tatiana Dementieva
⬤ The S&P 500's December low for 2025 sits at 6721, and the index has been hovering just 1% above that critical level. It's gotten traders talking about a pattern that's played out for decades: what happens when the market breaks below that December floor early in the year?
⬤ Here's where it gets interesting. Historical data shows that when the first-quarter low dips beneath the previous December low, the S&P 500's full-year performance tends to take a hit. We're talking an average annual return of around -0.2%, with a median close to -0.1%. Even more telling? Only 48.6% of these years ended positive. That's basically a losing coin flip.
The pattern has occurred more often than not over time, though 2025 hasn't followed the historical tendency so far.
⬤ The historical record includes some brutal years where this signal preceded drops exceeding 15%. But here's the catch—it's not a guarantee. Some years still delivered solid gains despite breaking that December low, proving that broader economic conditions and market dynamics can override this single indicator. The signal's more of a yellow flag than a red light.
⬤ Why does this matter? Because understanding how the S&P 500's behaved after similar technical setups gives you context for what might lie ahead. Breaking below the December low has historically meant rougher average outcomes and heightened uncertainty for the rest of the year. It's not a crystal ball, but it's a framework that's held up across multiple market cycles—and that's worth paying attention to.
Tatiana Dementieva
