The S&P 500 (^GSPC 0.34%) has advanced 93% since entering bull market territory in October 2022. But the bull market is still quite young by historical standards. Since 1957, the average duration has been five years, during which the index added an average of 184%.
However, several headwinds threaten to derail the bull market this year. The S&P 500 tends to perform poorly around midterm elections, recording an average intrayear drawdown of 18%, according to CFRA Research. In addition, the S&P 500's forward price-to-earnings ratio is near the "upper end of its historical range," according to the Federal Reserve.
Meanwhile, President Trump's tariffs are a significant source of uncertainty for consumers and businesses. As a result, consumer sentiment recorded its lowest reading in history (since surveys started in 1952) last year, and businesses have pumped the brakes on hiring new employees.
On that front, investors will get several important pieces of information this week.
Image source: Official White House Photo.
Jan. 7: The JOLTS report
The Bureau of Labor Statistics (BLS) plans to release the November JOLTS (Job Openings and Labor Turnover Survey) report on Wednesday, Jan. 7. Monthly job openings averaged 7.5 million through October, the lowest level since the COVID-19 pandemic shook the labor market in 2020. The consensus estimate calls for 7.6 million job openings in November.
The JOLTS report will also update another key metric: unemployed persons per job opening. By comparing the number of job seekers to the number of available jobs, it provides insight into how easily people can find work. The ratio has hovered around 1.0 this year, the highest level since the pandemic, meaning it has become increasingly difficult to find employment.
Here's the big picture: If job openings fall short of the forecast 7.6 million, or if the ratio of unemployed persons to job openings rises above 1.0, the stock market could have a negative reaction. Alternatively, investors may cheer a modest miss because it would pressure the Federal Reserve to cut interest rates.
Jan. 9: The Employment Situation report
The BLS will release the December Employment Situation report on Friday, January 9. The most anticipated metric is nonfarm payrolls, which measures the number of paid workers in sectors excluding agriculture. The economy added an average 55,000 jobs per month through November, which excluding the pandemic is the slowest growth since 2009.
Diving deeper, the economy added an average of 123,000 jobs per month through April. But President Trump's baseline tariff took effect during that month, and businesses responded to the uncertain trade environment by hiring far fewer employees. The economy has added just 17,000 jobs per month since May. The consensus estimate says nonfarm payrolls will increase 55,000 in December.
The Employment Situation report will also provide an update concerning unemployment. The unemployment rate gradually trended higher throughout 2025, climbing from 4% in January to 4.6% in November, the highest level in over four years. The consensus estimate says the unemployment rate will drop to 4.5% in December.
Here's the big picture: If nonfarm payrolls rise less than the forecast 55,000, or if the unemployment rate exceeds 4.6%, it would suggests President Trump's tariffs are still hurting the labor market. While the president has repeatedly promised his trade policies would protect American jobs, the truth is tariffs have so far raised prices across the economy, leaving businesses with less money for hiring.
Importantly, while sluggish hiring is ultimately bad news for the economy, the stock market may have a paradoxically positive reaction to weakness in the labor market for the reason I have already mentioned. Fed policymakers signaled one rate cut in 2026 at the December FOMC meeting, but more cuts are possible if the jobs market continues to deteriorate.
No matter what happens in the near term, investors should focus on building wealth over the long term. The S&P 500 returned 1,820%, which is equivalent to 10.3% annually, in the past 30 years, despite three recessions and four bear markets. So similar returns are likely over long periods in the future. That means any substantial drawdowns will probably prove to be good buying opportunities in hindsight.
