The financial markets are riding high. Will it last through 2025?
Posted By RichC on October 27, 2025
The stock market in late 2025 presents an interesting picture as we approach the final two months of the year. Based on historical data from 2003–2024, we can assess the probability of significant market corrections 
during November and December.
A severe pullback of 10% or more has been relatively rare, occurring in only 2 of the past 22 years—notably during the 2008 financial crisis and the 2018 fourth-quarter decline. This translates to roughly a 10% historical probability. When accounting for current market volatility of approximately 16% over the typical 40 trading days in this period, probability models suggest a 9–15% chance of such a correction. However, with current valuations at 22x forward earnings, the risk cannot be dismissed entirely. While economic conditions support a positive scenario, factors like persistent inflation or unexpected Federal Reserve policy changes could quickly alter the trajectory.
For a more moderate 5% decline, the probability increases substantially. Historical data shows that 11 of the past 22 years experienced at least a 5% intra-quarter drawdown during Q4, suggesting approximately a 50% probability. Volatility-based models indicate a somewhat lower 28–30% chance of reaching this threshold. Fourth-quarter seasonality plays a significant role, with year-end portfolio rebalancing, tax-loss harvesting, and other factors contributing to increased market fluctuations. Notably, 6 of the last 10 years saw such pullbacks, with most recovering by January.
Given current market conditions at all-time highs, maintaining some cash reserves for potential opportunities may be prudent. The final decision depends on individual risk tolerance and investment objectives.
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