♟ What the "Rule of 5" Predicts for 2025

Edward Lance Lorilla
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2021 - 2025

"Years ending in '5' have been historically strong for the S&P 500."

Bryan Bottarelli, Head Trade Tactician, Monument Traders Alliance

Bryan Bottarelli

When it comes to how I'm trading 2025, I have two major themes.

I went over both of them at the Monument Traders Alliance Roundtable yesterday.

Click here to watch the full event if you haven't already.

One concept I went over was "The Rule of 5."

It's a very simple rule I'm following this year.

Check out the data below...

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Looking back over the past 100 years, years ending in 5 have been consistently positive.

The one exception was 2015, when the equity market returned negative 1% - not too bad. Here are the historical results.

  • S&P Return 1935: +43%
  • S&P Return 1945: +30%
  • S&P Return 1955: +26%
  • S&P Return 1965: +9%
  • S&P Return 1975: +31%
  • S&P Return 1985: +26%
  • S&P Return 1995: +34%
  • S&P Return 2005: +3%
  • S&P Return 2015: -0.73%
  • S&P Return 2025: ???

Source: https://www.macrotrends.net/2526/sp-500-historical-annual-returns

Historical Returns for the S&P 500
 

As you'll see in the chart above, years ending in 5 have been some of the most historically strong years in the history of the market.

And this rule of 5 actually dovetails nicely into another data point I'm watching closely this year.

You see... while there's clear positive S&P correlation for years ending in "5," we also have a situation where we haven't seen a 10% correction in more than 18 months.

Typically markets pullback at least 10% every 8 to 9 months.

So here we are, in a strong market year ending in "5," but we haven't seen a 10% correction that we're overdue for.

Do you see the conflict there?

Which brings me back to the thesis of 2025 being "an investor hell and a trader's paradise."

I could see the 2025 market ending in the positive but also see a freak-out period where the market has a 10% pullback.

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YOUR ACTION PLAN

Based on the recent data, let's prepare for more upside bias in 2025 - but at the same time - also be ready for a major market correction - which I believe is long overdue.

For more on my complete 2025 trading plan, check out the Monument Traders Alliance Live Roundtable.

I also gave my No. 1 takeover candidate for 2025 during this event.

You won't want to miss that pick.

Click here to unlock my latest buy opportunity.


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