The outsized rally in the US stock market this year may give way to a more muted performance in 2020 if history is any guide.
The benchmark S&P 500 is up nearly 28 percent for the year, which if the market closed this week for the year, would mark the second-best annual performance for the index since 1997.
However, investors who are hoping the rally will continue charging ahead through next year may be disappointed. The S&P 500 has returned an average of 6.6 percent in the year following a rally of 20 percent or more since 1928, slightly below the 7.6 percent return in all years, according to research from Bespoke Investment Group.
Fund managers and strategists say there are several reasons to believe that the stock market will not continue on a path of notching double-digit annual returns like it did during the late '90s tech bubble.
"We're up a lot this year, but we had a historically bad 4th quarter last year," said Ryan Detrick, senior market strategist for LPL Financial. "This isn't because of spectacular growth in the economy but the market realizing that we're not going to have a recession."
The S&P 500 posted its biggest drop since the 2008 financial crisis last year as investors worried that the trade war between the United States and China would push the global economy into a recession. The Federal Reserve's decision to change course in early January from its path of raising interest rates helped fuel the rally in the stock market this year.
The Fed also helped spark a bond rally that pushed 10-year Treasury yields near historic lows and boosted dividend-paying stocks, further pointing to concerns about the strength of the US economy, said Liz Ann Sonders, chief investment strategist at Charles Schwab.