Can you believe it? As we close the books on 2025, the S&P 500 is poised to deliver yet another year of impressive gains—something around 17% if things hold steady. That makes three years in a row with double-digit returns, a pattern that doesn’t show up often in the market’s long history. It’s got me thinking: what does this kind of momentum really mean for the year ahead?
I’ve followed the markets for years, and streaks like this always catch my eye. They’re exciting, sure, but they also come with questions. Will the good times keep rolling into 2026, or are we due for a reality check? Let’s dive into what the past tells us and unpack the possibilities without getting too carried away.
A Rare Three-Year Run of Strong Gains
First off, putting up solid numbers three years straight isn’t something the S&P 500 does every day. In fact, since records began way back in 1928, this level of consistency—gains north of 15% each year—has only happened a couple of times before. Think about the wild ride of the late 1990s during the tech boom, or more recently, the surge leading into the pandemic era.
What stands out to me is how different those previous streaks ended. One kept going strong for a while, while the other hit a sharp downturn in year four. That contrast makes the current situation so intriguing. We’re coming off roughly 24% in 2023, over 23% in 2024, and now this solid 17% in 2025 despite all the ups and downs along the way.
Volatility was definitely part of the story this year. We saw plenty of swings, especially early on, but the index powered through. In my view, that resilience speaks volumes about the underlying strength in the economy right now.
Historical Patterns After Big Gain Years
When the market posts a year with at least 15% growth, what tends to happen next? Data going back decades suggests the average return in the following year lands around 8%. Not bad at all—still positive territory, though a step down from the blockbuster numbers.
But here’s the catch: those years aren’t smooth sailing. On average, you might see a drawdown of about 14% at some point. It’s a reminder that even in continuing bull markets, pullbacks are normal. They test your patience, but they don’t always spell the end of the run.
Strong bull markets are rarely linear—they come with bumps along the road.
Looking specifically at years when returns fell in that 10% to 20% range—like what we’re seeing in 2025—there have been over 20 similar instances since 1928. In those cases, the next year delivered positive returns about 70% of the time, with a median gain around 12%. That’s encouraging if you’re hoping for more upside.
Comparing to Past Streaks
Let’s put this in context with those rare multi-year runs. The late 1990s saw five straight years of big gains, fueled by tech mania. It felt unstoppable at the time, but we all know how that bubble eventually played out.
Then there was the 2019-2021 period, riding high on recovery and stimulus. Three strong years, much like now. Unfortunately, 2022 brought a painful bear market with losses over 19%. Inflation, rate hikes—sound familiar? It shows how quickly sentiment can shift.
The big difference today? The economy feels more balanced. Corporate earnings have been consistently growing in double digits, consumers are holding up well, and there’s real strength across sectors. Perhaps that’s why 2025 felt so resilient despite the noise.
- Strong earnings growth supporting valuations
- Robust consumer spending powering the economy
- Broad participation beyond just a few big names
- Policy changes creating both challenges and opportunities
Of course, nothing is guaranteed. Tariffs, inflation concerns, geopolitical tensions—they’re all still in the mix. But the foundation seems sturdier than in some past cycles.
What Could Drive 2026 Performance?
Looking ahead, several factors could shape whether we see continued gains or a pause. Earnings will be front and center, as always. If companies keep delivering growth, that provides a solid floor for stock prices.
Interest rates matter too. Any signs of easing could give equities another boost, while persistent tightness might weigh on sentiment. I’ve found that markets often anticipate rate moves well in advance, so watching the signals closely pays off.
Then there’s the broader economic picture. As long as job growth stays decent and recession fears remain on the back burner, risk assets like stocks tend to perform well. Consumer confidence plays a huge role here—people feeling good about their finances keep spending, which feeds into corporate profits.
Risks Worth Watching Closely
No discussion of the outlook would be complete without talking risks. After three strong years, valuations are stretched in places. That doesn’t mean a crash is imminent, but it does mean selectivity becomes more important.
Policy uncertainty is another wildcard. New administration priorities, trade developments—they can create short-term volatility even if the long-term impact is neutral or positive.
And let’s not forget about sentiment. When everyone gets too optimistic, that’s often when corrections happen. Staying grounded and diversified helps navigate those moments.
- Potential for mid-year pullbacks even in up years
- Impact of election-year dynamics historically
- Sector rotation as leadership changes
- Global events influencing U.S. markets
Positioning for Whatever Comes Next
So how should investors think about approaching 2026? In my experience, sticking to the basics works best during uncertain times. Maintain a long-term perspective, rebalance regularly, and avoid chasing performance.
Diversification across sectors and asset classes remains key. Quality matters more when growth slows—companies with strong balance sheets and consistent profitability tend to hold up better.
Perhaps the most interesting aspect is opportunity within volatility. Pullbacks have historically provided entry points for long-term investors. Having some dry powder ready can make a real difference.
| Scenario | Likely Drivers | Historical Frequency |
| Continued Gains | Earnings growth, stable rates | Common after strong years |
| Modest Returns | Valuation reset, mild volatility | Most typical outcome |
| Correction/Bear | Policy shocks, recession | Less common mid-streak |
At the end of the day, markets reward patience. These streaks are rare for a reason—they reflect genuine economic strength. Whether 2026 brings another strong year or a breather, staying invested through cycles has historically been the winning strategy.
I’m cautiously optimistic. The setup feels solid, but I’ll be watching the data points closely as always. Whatever happens, it’s bound to be an interesting ride.
One final thought: markets climb walls of worry. We’ve had plenty of worries these past three years, yet here we are with impressive cumulative returns. That resilience is what keeps me bullish on American equities over the long haul.
If history is any guide—and it usually offers at least some hints—2026 could very well deliver positive returns again. But as always, expect some twists along the way. That’s what makes this game so fascinating.
