The S&P 500 has experienced significant gains since crossing into bull market territory in October 2022, surging roughly 93%. Yet, from a historical standpoint dating back to 1957, this bull phase remains nascent, with the average bull market lasting about five years and yielding an average return of 184%. Despite recent progress, several substantial risks threaten to destabilize this upward trajectory within the current year.
Market analysts highlight that the S&P 500 typically underperforms in periods surrounding midterm elections, often experiencing an average intrayear decline of about 18%, as noted by CFRA Research. The market's valuation measures also suggest caution; the Federal Reserve has indicated that the S&P 500’s forward price-to-earnings ratio is approaching the upper bounds of its historical spectrum. This elevated valuation raises concerns about the sustainability of gains.
Contributing further to uncertainty are the tariffs imposed under President Trump’s administration. These trade policies have cast a shadow over consumer and business confidence. Data reveals that consumer sentiment hit its lowest recorded point since surveys began in 1952, reflecting significant apprehension among households. Concurrently, businesses have responded by throttling back on hiring, signaling caution in the face of escalating trade tensions and their economic reverberations.
Amid these concerns, investors will receive two crucial reports this week that may shed light on the labor market’s health, offering insight into how tariffs continue to influence economic activity.
January 7: The JOLTS Report
The Bureau of Labor Statistics (BLS) is set to publish its November iteration of the Job Openings and Labor Turnover Survey (JOLTS) on Wednesday, January 7. Throughout 2025, monthly job openings have averaged approximately 7.5 million, marking the most subdued level since the disruption caused by the COVID-19 pandemic in 2020. Market consensus forecasts a slight uptick to 7.6 million job openings in November.
Beyond job vacancies, the JOLTS report also provides an update on the ratio of unemployed persons to job openings, a metric that offers insights into the ease or difficulty of finding employment. This ratio has hovered near 1.0 during the current year, representing the highest reading since the pandemic. A ratio at or above this level indicates an increasingly challenging environment for job seekers.
The broader significance is that if the number of job openings fails to meet expectations, or if the unemployed-to-job openings ratio climbs beyond 1.0, equities could face downward pressure. Yet interestingly, a modest miss might also be interpreted positively by some investors since it could increase the pressure on the Federal Reserve to lower interest rates to support the economy.
January 9: The Employment Situation Report
Scheduled for release on Friday, January 9, the BLS will issue the Employment Situation report reflecting December’s labor market conditions. A focal point of this report is the nonfarm payrolls figure, which quantifies employment gains or losses outside the agricultural sector.
Year-to-date through November, the economy has added an average of 55,000 jobs monthly, the slowest pace excluding pandemic years since 2009. Prior to the implementation of President Trump’s baseline tariffs in April, monthly job creation averaged 123,000. However, post-tariff imposition, businesses have tempered hiring significantly, averaging just 17,000 new jobs per month since May. The consensus forecast anticipates December nonfarm payrolls to increase by 55,000.
Additionally, the report will update the unemployment rate—a key barometer of labor market health. Throughout 2025, unemployment gradually trended higher, rising from 4.0% in January to 4.6% in November, marking the peak over the past four years. The consensus estimate suggests a slight improvement, with December’s unemployment rate projected to decline to 4.5%.
These figures carry implications regarding tariffs’ ongoing effects. If job creation underwhelms expectations or the unemployment rate remains elevated above recent highs, it would underscore continued labor market strain attributed to tariff-driven economic pressures. Businesses facing higher costs and lower margins due to tariffs may be constrained in their capacity to hire.
Despite the economic challenges that a sluggish labor market implies, market participants might respond positively. Policymakers at the Federal Reserve have already indicated intentions for at least one interest rate reduction in 2026 at the December Federal Open Market Committee meeting. Should labor market deterioration continue, the likelihood of additional rate cuts could increase, a scenario that investors may welcome for supporting equity valuations.
Long-Term Perspective for Investors
While short-term labor data and tariff impacts inject volatility and uncertainty, a broader temporal lens offers perspective. Over the past three decades, the S&P 500 has returned approximately 1,820%, averaging about 10.3% annually. This performance was achieved during a period that included multiple recessions and bear markets, highlighting the potential resilience of long-term equity investment despite cyclical headwinds.
Consequently, market pullbacks triggered by adverse economic reports frequently represent prospective opportunities for long-term wealth accumulation. Investors maintaining disciplined strategies and focusing beyond immediate disruptions may better position themselves for eventual market recoveries and growth.