If you follow sports, even passively, you probably know how hard it is to win back-to-back-to-back championships. It’s called a three-peat^TM and in major U.S. sports only a handful of teams have ever done it. In professional basketball, the honor roll includes dynasties like the 1960s Boston Celtics, the LA Lakers of the late 1990s, and Michael Jordan’s Chicago Bulls. In pro football, the Green Bay Packers have done it twice — including two streaks of total domination completed mostly before there was even such a thing as a Super Bowl. And then there’s the New York Yankees, the three-peaters of three-peats, who three-peated as Major League Baseball champs across three different decades: The 1930s, the 1940s, and the 1990s.¹

In fact, winning three consecutive championships is so rare that if you do it, fans will redefine your period of serial success as an ‘era.’ Indeed, the word three-peat even qualifies for protection by US Patent Office: Then-Laker’s coach Pat Riley was awarded a trademark for the phrase in late 1988 so his back office could plaster it on team merch as they attempted to win the 1989 NBA championship after securing titles in both 1987 and 1988.

A three-peat is a rare accomplishment for markets, too. If we define a championship season as one where the S&P 500 Index puts up an annualized gain of at least 20%, there has only been one ‘S&P three-peat’ since the 1970s: A winning streak between 1995 and 1999 when the Index put more than 20 points on the board year after year for five years in a row.² And just like the Yankees, the Packers, or Jordan’s Bulls, that period defined a dynasty that anyone who watched from the stands will immediately recognize and recall with nostalgia: For markets, that was known as the ‘dot-com’ era.

As we start 2025, we’re watching a legitimate set-up for another potential three-peat congeal: Last year’s 25% gain by the S&P 500 Index followed 2023’s gain of more than 26%, meaning that if 2025 turns out to be equally exuberant, we’ll very likely have another three-peat on our hands. And we’ve already got a few ideas in mind for how to label it: If it happens, maybe the AI-fueled boom of 2023-2026 will come to be known as the era of the Cognition Congruency, or the period of Nvidia Nascency, or, more ominously, simply ‘the Singularity.’ (‘The Rise of Skynet’ might work too, but I eventually rejected that one for fear that too many youngsters out there might miss the reference...)

I’d love to hear your ideas. But at the same time, I’d probably avoid spending too much time preparing your trademark application because markets have an unfortunate habit of dropping the ball after going back-to-back. It happened in 1977 (when the S&P lost 7% after putting up gains of 37.2% and 23.9% in 1975-76, respectively), and then again in 1984 (when a +6.3% gain followed back-to-back returns of 21-22%). Even more troublesome for those betting on a market three-peat is the fact that even following a fairly upbeat session last Friday, Santa was indeed a no-show this year: Markets lost 2-3% during the traditionally upbeat seven-day period that usually defines the Santa Claus Rally. That might remind fans of the disappointment of following up a championship season by drafting the college stud who fails to even make the practice squad, because the last time the Santa Rally was so decisively upside down was 2014, which foreshadowed a weak return of around 1.4% in 2015.

So what does all this mean? Nothing at all. For example, Santa was also a no-show in 2015 and market returns were just fine in 2016. I could also have just as easily offered up a more recent example as a counterpoint to the 2014-15 episode of Santa Gone Bad: The Santa Claus ‘Rally’ of 2023 was -1.5%, and we all now know how 2024 turned out.

So let these anecdotes serve as anecdotes to illustrate the fallacy of putting too much faith in, well, anecdotes. Besides, as statistically unlikely as a three-peat may be, it’s still achievable if you have Michael Jordan on your roster or Bart Starr in your locker room. (Remember, the market achieved back-to-back 20%-plus annual returns five times in the late 1990s, the financial equivalent of hanging five championship banners from the rafters of the United Center). But the required reliance on talent to consistently put up dubs is also why the economy still matters — in markets, if the individual companies who issue investment represent star players, then the macroeconomic backdrop is akin to the front office of your favorite franchise who does all the necessary work to create the atmosphere in which those players will either thrive or languish. And although things look fine for now, there is still room to wonder whether the chemistry necessary for a market three-peat really exists.

Case-in-point from last week’s calendar: The Market News Index (MNI) Chicago Purchasing Managers’ Index dropped back to a near-cycle low of 36.9 in December as new order activity dropped.³ There were bright spots in the report, including renewed signs of hiring in the manufacturing sector and rising backlogs of work. It was also reassuring to read that at least so far manufacturers are not overly spooked by tariff proposals being floated by the incoming administration. Meanwhile, the MNI Chicago’s modestly upbeat tone was echoed by the Dallas Fed’s TMOS (which stands for ‘Texas Manufacturing Outlook Survey'), the third so-called ‘regional Fed,’ and a happy read insofar as it improved somewhat from last month’s result.⁴ Slightly better-than-expected manufacturing data from both the Institute of Supply Management and S&P Global made for similar reading.^5,6

But it's still worth remembering that for its part, the MNI Chicago — which has one of the longest and most efficacious histories of economic indicators — has rarely been this low without an associated recession. Moreover, housing affordability hasn’t improved much, as last week’s home price data from S&P CoreLogic and the FHFA made clear by continuing to rise.^7,8 If the economy hopes to roar in 2025, housing — and therefore housing affordability — will probably have to improve.

Is a market three-peat possible? Of course it is. But just like fitting a third Super Bowl ring over the gnarled knuckles of an NFL lineman or earning the right to parade around your hometown with the Stanley Cup for a third consecutive summer, it’s not an easy task. And it will require a whole lot of things to come together in a way that, at least for now, feels at least a little bit less likely.

And when all is said and done, the most optimistic among us would do well to remember that Pat Riley — who so confidently trademarked the phrase in the late 1980s — failed to secure a three-peat when his Lakers lost to the Detroit Pistons in four games during the 1989 NBA finals.  Yeah, it’s easy to be humbled — even when you’re Pat Riley wearing a three-peat T-shirt.

What to watch this week  

Welcome back to a busy calendar.

After two weeks of comparatively light trading and subdued news flow, the first full week of 2025 will provide plenty of fireworks. Its payrolls week, which means we’ll get a fresh batch of answers to the question of ‘how fast is the labor market really slowing?’ throughout the week. It seems unlikely that December’s jobs data will hold many surprises, but keep in mind that initial unemployment claims surged early in the month and continuing claims data showed a little holiday bulge of its own toward the end of December.

The fun starts for real on Tuesday with job openings and quits data as provided by the Department of Labor’s JOLTs report (Job Openings and Labor Turnover), then winds its way to Friday’s big day after first passing through ADP payrolls (Wednesday) and Challenger layoff announcements (Thursday). While Friday’s non-farm payroll release gets (and still deserves) top billing, I’d still pay close attention to layoff data from Challenger, Gray, and Christmas as a better read on what might be coming to an employment office near you in 2025. Watch especially for any hints of a late winter/early spring surge in downsizing as budgets for 2025 are recalibrated. (Programming note: Weekly claims data will be released on Wednesday instead of Thursday, given the national day of mourning currently scheduled to take place on Thursday ).

Second on the list of what to watch is the furtive start to fourth-quarter earnings season. This month feels like a small break with tradition as big banks will spread themselves out over several days: Bank of America and Wells Fargo are expected to release results on Friday, while other notables like JPMorgan, Citigroup and others plan to wait until next week. In recent quarters, big bank earnings have tended to drop together on the same Friday, providing a busy — but convenient — start to the season for those who care about such things. We’ll also get earnings from a homebuilder (KBHomes, on Thursday) and an airline (Delta, on Friday). Both are potentially important as first looks into how consumers are holding up as 2025 gets underway.

It’s no overstatement to say that these two items — jobs data and quarterly earnings — will set the tone for 2025. Both are always important as a window into the macro, but now more than ever: Jobs matter more now because the Fed is so squarely focused on the employment side of their mandate, while earnings matter more than usual because equity markets are so highly concentrated and valuations are still visibly stretched. Other data will eventually matter, but none so much in the here-and-now as earnings and jobs data.

We’ll get two reads on the state of the services sector, with S&P Global’s Purchasing Manager’s Index scheduled for release on Monday and the Institute of Supply Management’s version on Tuesday. As discussed above, last week’s data finally began painting a somewhat hopeful picture of manufacturing. But recent data from the services sector has also contained hints that activity there might be starting to fade. We’ve long hoped that a recovery in manufacturing might occur alongside persistent strength in services, which would definitely help sound the all-clear for the US economy. But if the two are simply swapping positions (with manufacturing rebounding while services retreats,) that would obviously no longer apply. Read this week’s releases (and future ones, too), for answers.

Under the heading of “miscellaneous”, the University of Michigan will release its first consumer sentiment survey of 2025 on Friday. Meanwhile, the Federal Reserve will release the official minutes of its December 17^th-18^th meeting on Wednesday. Recall that one participant, Cleveland’s Beth Hammack, dissented in favor of a pause while the so-called dot-plot suggested that committee members collectively saw roughly two rate cuts in 2025 as likely, down from around four earlier in the year. For my part, I’ll be searching the notes for phrases like “darkened rooms” and “bumping your shins on the furniture” — images invoked by the Chair during last month’s Q&A session that made December’s post-decision press conference among the most notable in a long time.

Finally, a reminder that markets will be closed on Thursday in mourning for former President Jimmy Carter, who passed away last week at the age of 100. Normal trading will resume on Friday.