Stocks Just Rallied After Earnings Season. History Shows June Could Be a Rough One

If the past is any guide, the strong earnings results from the first quarter and the impressive May rally could signal a bumpier road for investors in the near term.

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According to Evercore ISI, the recently concluded earnings season, which wrapped up last week with Nvidia posting stronger-than-expected earnings and revenue, marked a clear continuation of the long-term bull market fueled by advancements in artificial intelligence. In a note published Sunday, the investment firm emphasized that this quarter's performance ranked among the most robust since 1992 in terms of how much it lifted markets.

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Julian Emanuel, a senior managing director at Evercore ISI, described the quarter as a "blowout." Of the 493 companies in the S&P 500 that reported — accounting for 98% of the index’s market value — earnings grew by 13.1%, while sales increased by 5.0%. These numbers exceeded expectations by 8.1% and 0.8%, respectively.

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This wave of strong results helped push the S&P 500 up by about 6.2% in May, making it the index’s best monthly performance since November 2023. Notably, this rally occurred despite ongoing uncertainty surrounding former President Donald Trump’s proposed new tax policy, which he has called a “big, beautiful” tax bill.

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Yet while the current market picture looks bright, Emanuel cautioned that such powerful rallies are often followed by heightened volatility. “When you see a major rally during earnings season like we just had in Q1 2025, history shows that the next month tends to be marked by choppy returns and increased volatility,” he wrote.

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Supporting this view, Emanuel pointed to the CBOE Volatility Index (VIX), which is widely regarded as Wall Street’s primary measure of market fear. On average, the VIX has climbed 19% in the month following a major earnings-season-fueled rally. For instance, after a similarly strong rally in the second quarter of 2022, the VIX jumped more than 17% the following month.

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Historical data from Evercore ISI illustrates this pattern. In Q2 of 2022, the S&P 500 gained 10.5% during earnings season but then dropped 9.0% in the month that followed, while the VIX rose 17.1%. A similar sequence occurred in Q3 2014, when an 8.8% rally was followed by a 1.8% decline in the S&P 500 and a sharp 58.4% rise in the VIX. In contrast, some previous rallies led to modest gains and less volatility, such as in Q2 2009 and Q3 1999, though these instances were less common.

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On average, the S&P 500 has returned -0.2% in the month following major earnings-season rallies, while the VIX has gained about 19%, reinforcing the idea that big earnings-fueled moves often lead to periods of consolidation or market turbulence.

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Still, despite the likelihood of increased volatility ahead, Emanuel stressed that investors shouldn’t fear a return to the market’s lows. Speaking on CNBC’s “Squawk on the Street” Monday morning, he said he remains confident in the broader market’s direction.

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“We believe the market still has room to run, and we’re not forecasting a recession,” Emanuel explained. “As we’ve seen before, policymakers tend to adapt or adjust when the market hits lower levels, but we don’t believe there’s a need to revisit those lows. Instead, this could be a healthy phase where we gain more clarity around key policy decisions.”

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His view suggests that while the market may see some turbulence in June, it’s part of a normal and even beneficial adjustment process following an exceptionally strong rally. Rather than signaling the end of the bull run, the expected choppiness could simply represent a pause as investors digest gains and wait for more information on policy changes and macroeconomic developments.

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In summary, the first-quarter earnings season delivered standout results, fueling one of the strongest market performances in years. However, as history has shown, such explosive gains are often followed by a pullback or increased market swings.

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While some volatility may be on the horizon, analysts like Emanuel remain optimistic that the underlying strength of the market will persist, driven by structural factors like AI and supportive, adaptive policy measures.

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