The S&P 500’s powerful 2025 rally mirrors only four periods in the past 100 years — the 1920s, 1930s, 1950s, and 1990s. Discover what history says about today’s AI-driven bull market and whether it’s a bubble or a breakthrough.
The stock market has spent most of 2025 defying both gravity and logic. Despite “persistent geopolitical tensions in Europe and the Middle East, new tariffs, and unease over the timing of the Federal Reserve’s policy decisions,” the S&P 500 is up roughly 13% year to date as of Oct. 13. Yet, as the article notes, “this headline figure hardly captures the full drama beneath the surface.”
The year began “with roaring optimism, fueled by accelerating investment in artificial intelligence (AI).” But the rally hit turbulence in April when “President Trump announced his ‘Liberation Day’ tariffs,” briefly shaking Wall Street’s confidence. Since bottoming in mid-April, “the S&P 500 has surged more than 20% — a powerful rebound that has reignited the bull market.”
If this momentum holds through the end of the year, 2025 would mark a third consecutive year of double-digit gains. That kind of streak is “exceedingly rare.” Over the past century, the index has posted back-to-back annual gains of 20% or more in only four distinct eras: the 1920s, 1930s, 1950s, and 1990s.
Each of those eras, the article reminds us, “created enormous wealth — but also painful lessons — reminding investors that history’s verdict on sustained rallies is anything but clear.”
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History’s Echo: Four Eras, Four Outcomes
The 1920s “marked America’s first great consumption boom,” driven by “rapid industrialization, easy credit, and a cultural embrace of modernity.” Markets soared alongside public confidence in “seemingly endless prosperity.” But “as euphoria turned to speculation, valuations detached from reality,” leading to the crash of 1929 that “swiftly eroded a decade’s worth of optimism.”
The 1930s told “a very different story.” Between 1935 and 1936, “the S&P 500 surged a cumulative 69% — only to plunge 38% the following year before rebounding 25% in 1938.” This period was “defined by economic despair,” where “bouts of optimism often gave way to renewed fear.” Rallies were “fragile and fleeting,” marking a decade “hallmarked more by volatility than victory.”
In contrast, the 1950s delivered “genuine and sustained prosperity.” Between 1954 and 1955, “the S&P 500 gained 45% and 26%, respectively.” Unlike earlier booms, this expansion “wasn’t driven by speculation but rather by the rise of a middle-class economy and peacetime stability.”
Then came the 1990s, an era the article describes as “bearing striking resemblance to today’s AI-driven market.” The internet “revolutionized commerce, communication, and culture,” pushing stocks “into a new stratosphere.” Yet that same exuberance “eventually created the dot-com bubble,” which “burst in 2000 and erased trillions in paper wealth overnight.”
Are We in a Bubble — or a Breakthrough?
The current rally “sits at the crossroads of history’s familiar patterns.” On one side, “the AI revolution has become this generation’s defining investment theme.” Sectors like “semiconductors, data centers, cloud computing, and even nuclear energy stocks have led the charge,” transforming balance sheets and expectations.
Skeptics warn that “valuations have grown frothy,” suggesting that “AI hype may be destined to repeat the exaggerations of 1999.” But, as the article emphasizes, “calling today’s market a bubble discounts an important nuance: AI isn’t a passing trend.” Instead, “it could be the beginning of a structural shift with enduring economic consequences — more akin to the advent of electricity or the internet than to a momentary, narrative-driven frenzy.”
This, in turn, “makes the path forward virtually impossible to predict.” The market “could very well cool off as earnings growth catches up to lofty investor expectations.” Or it “could kick into a new gear if AI’s productivity gains begin to meaningfully lift global output.”
Either way, “this cycle embodies a familiar mix of genuine innovation sprinkled with speculative excitement — a combination that has defined every great era of progress in market history.”
The One Lesson History Never Fails to Teach
“Trying to predict when the market will surge or stumble is an exercise in false precision,” the article concludes. Instead, “a more reliable approach is to own quality businesses led by capable management teams, hold them through periods of volatility, and steadily add to your winners while trimming your laggards.”
While “history does not provide a precise strategy,” one lesson stands out: “The S&P 500 rewards patience.”
The market “has endured wars, recessions, bubbles, and crashes.” Yet “over the long run, the S&P 500 has delivered compound annual gains of about 7% after adjusting for inflation.”
As the article wisely notes, “The stock market can lose its way for years at a time, but it always finds its direction again.” Across a century of “panics, policy shifts, and economic upheavals, one truth has persisted — resilience has been the market’s defining attribute.”
Source: The Motley Fool — “The stock market has only seen 4 periods like this in 100 years. What happens next?” by Adam Spatacco
