The stock market is a fascinating place where the future is always uncertain, yet we constantly try to predict it using the rearview mirror of history. Right now, the S&P 500 is on the verge of doing something so rare it has only happened a handful of times in the last century, and investors are holding their breath to see which historical path we follow next.
The event in question? The market is currently on track to deliver a third consecutive year of double-digit percentage gains. As we close out 2025, if the index achieves this milestone, it will have pulled off a feat that has only occurred a few times since the S&P 500’s predecessor index was established back in 1926. It’s a moment of peak momentum that puts 2026 in a precarious, yet potentially thrilling, position.
What History Tells Us About Year Four
When you have a three-year streak of powerful double-digit returns, what typically comes next? Unfortunately for forecasters, history gives us a mixed bag of results, suggesting that a big move—in either direction—is likely. This is the quintessential all-or-nothing scenario for the stock market.
In the most optimistic historical outcomes, the momentum carries right on through. For example, during the mid-1940s streak, the market delivered a colossal 35.8% return in the fourth year. Similarly, the surge that defined the late 1990s tech boom also saw the market extend its run into a fourth positive year. This suggests that once the market is running hot, sometimes the best thing to do is simply hang on for more.
However, that excitement must be tempered by a cautionary note. In other instances, the party ended abruptly. Investors need only look at the streak that preceded the famous crash of 1929, which brought an immediate halt to the roaring returns. More recently, the three-year run from 2019 to 2021 was immediately followed by a steep 18% plunge in 2022 as inflation and rising interest rates took their toll. History suggests that the year following such a streak is almost as likely to see a major correction as it is to see a major jump.
The Context That Matters Now
The current streak has been powered largely by revolutionary shifts. The excitement around artificial intelligence, a post-pandemic economic rebound, and moderating inflation fears have all combined to propel the index to record highs. In fact, some of the most aggressive forecasts for 2026 are already calling for a significant year, with targets implying gains of 18% or more.
But there are red flags. The overall market valuation, particularly when compared to the size of the US economy, has reached levels that legendary investors have previously flagged as “playing with fire.” Global trade tensions and the possibility of new tariffs add a layer of geopolitical risk that could easily sour investor sentiment, even with the tailwind of AI innovation.
So, as the S&P 500 enters this extremely rare historical territory, investors are left with a classic market dilemma. Will the powerful forces of a new bull market and technology continue to propel a fourth year of gains, or are we simply facing an overdue correction? While no one can know for sure, history’s loudest message is this: Whatever happens in 2026, don’t expect it to be boring. Big moves are a certainty when market momentum reaches this level.