The SandP 500 breaks a five-quarter winning streak

The flagship index of the US stock market has had its worst quarter since 2022

What will happen to the S&P 500 next?

After five straight quarterly gains, the S&P 500 saw its worst quarter since 2022 in the first quarter of 2025, dropping 4 points and 6 percent.

Track every market with TradingView The S&P 500, the benchmark index for the US stock market, is made up of the 500 biggest publicly traded companies in the nation and is therefore seen as a barometer of the state of the US economy. The S&P 500 is home to many of the top stocks in the world, and since it includes 17 of the top 20 most valuable companies in the world, stock market-tracking funds will always have a significant weighting towards it.

As a result, its decline hurts investors around the world, but because pension funds are exposed to the global stock market, they will also be affected.

"The S&P 500 has had one of its worst quarters since 2022, capped off by a miserable March," says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Before March, the S&P had risen for five straight quarters, a run that began in Q3 2023 when the S&P 500 dropped 3 point seven percent.

S&P 500 quarterly returns from 2022 to Q1 2025 are displayed in a bar chart.

In Q1 2025, the S&P 500 ended a five-quarter winning run.

But in the long run, the S&P 500 has been a powerful return generator.

Examine the causes of its Q1 decline and inquire as to whether it will eventually be able to continue growing.

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What caused the Q1 2025 decline in the S&P 500?

So far this year, the S&P 500 has been shook by a number of events.

First off, since it seemed to be able to achieve comparable outcomes to American AI companies at a fraction of the infrastructure and training costs, DeepSeek, a Chinese generative AI startup, rattled investor confidence in the dominance of US technology companies, particularly Nvidia.

Stocks dropped following results, even if they surpassed market expectations, as a result of the tense tech earnings season. This has consequently caused a prolonged Magnificent Seven selloff that has hurt some of the largest names in the index.

However, market pessimism ahead of tariff day, or Liberation Day as President Trump has dubbed it, which is tomorrow, Wednesday, April 2, is what has really hurt the index during the second half of the quarter. The index has been harmed by worries about how broad tariffs will affect the global economy, where the majority of S&P 500 companies have their headquarters, and the US economy, where the majority of its largest constituents make the majority of their income.

But sentiment isn't just bad among investors. The businesses themselves anticipate negative outcomes. According to FactSet research, 68 out of 107 S&P 500 companies have released guidance so far that has projections below the market consensus before their announcement, meaning that more than average have issued negative earnings per share (EPS) guidance for Q1.

This pessimism appears to be driven by technology companies. John Butters, a senior earnings analyst at FactSet, notes that, of the 11 sectors, the information technology sector has the most companies issuing negative EPS guidance at the sector level (26).

Long-term S&P 500 forecast.

However, the S&P 500 has yielded robust returns in the long run.

The index's gain over the past decade has been roughly 170 percent. It has increased by about 380 percent in the last 20 years.

Of course, there is no assurance that these long-term patterns will persist. It's crucial to keep in mind, though, that the US economy is the biggest in the world and that, historically, even significant downturns, such as the 2008 financial crisis or the collapse of the .-com bubble, have eventually led to long-term growth.

Britzman says, "Volatility looks set to continue in the near term, but if White House-fueled uncertainty turns out to be temporary, this could still be a good time to pick up quality names at a discount that is affordable."