The S&P 500 is on the verge of achieving something remarkable. With a year-to-date return of 17.51% as of mid-December 2025, the benchmark index is set to deliver double-digit gains for the third consecutive year. This follows returns of 26.29% in 2023 and 25.02% in 2024, a streak that has occurred only 11 times in the past century.
For investors, this raises an important question: what typically happens after such an extraordinary run, and how should portfolios be positioned heading into 2026?
The current three-year stretch of double-digit returns stands out even by historical standards. Looking at the actual figures:
What makes this streak particularly notable is the magnitude of gains in 2023 and 2024. Back-to-back years of 20%+ returns had not occurred since the late 1990s, when the index delivered four consecutive years of gains exceeding 20% from 1995 to 1998. That period, of course, was followed by the dot-com crash and three straight years of losses.
Since the S&P 500 was established in its current 500-company form in 1957, only five previous instances have seen three consecutive years of double-digit gains. This places the current market environment in rare historical territory.
According to research from Yardeni Research and LPL Financial, the average bull market since 1950 has:
By these measures, the current bull market, now just over three years old may only be halfway through its typical lifespan. If historical averages hold, investors could see another 92% in gains before this cycle ends.
However, historical averages come with important caveats. Each market cycle is shaped by unique economic conditions, policy decisions, and global events.
Several factors have contributed to the S&P 500’s strong performance over the past three years.
Monetary policy has also played a supportive role. After aggressive rate hikes in 2022 and 2023 to combat growing inflation, the Federal Reserve pivoted to rate cuts in late 2024. As of December 2025, the Fed has reduced rates to 3.75% following three consecutive quarter-point cuts.
Lower interest rates generally support equity valuations by reducing borrowing costs for companies and making stocks more attractive relative to bonds.
The timing is notable: ChatGPT launched in November 2022, just one month after this bull market began. Artificial intelligence has since become the dominant investment theme, driving extraordinary gains in technology stocks.
Seven companies – Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Broadcom have accounted for nearly half of the S&P 500’s total gains since October 2022. Nvidia alone has surged approximately 1,500% during this period, fuelled by surging demand for AI chips.
This concentration presents both opportunity and risk.
Despite persistent concerns about recession, the U.S. economy has demonstrated surprising resilience. Consumer spending has remained robust, unemployment has stayed historically low, and corporate earnings have continued to grow. S&P 500 earnings per share are expected to reach $269 in 2025.
When the S&P 500 has delivered three straight years of double-digit returns, the following year has historically produced more modest gains. On average, the fourth year has returned approximately 3% significantly below the long-term average of around 10%.
This suggests that markets may consolidate after extended periods of strong performance, as valuations catch up with fundamentals.
However, a different lens offers more optimism. Of the seven bull markets since 1950 that lasted at least four years, six produced positive returns in year four, with an average gain of 12.8%.
The current bull market has already proven stronger than average, gaining 92% in three years compared to the typical 88% for bull markets that completed four years. This suggests investors remain confident in the underlying fundamentals.
Analyst consensus points to continued gains, albeit at a more moderate pace.
According to FactSet Research, the bottom-up consensus price target for the S&P 500 is approximately 7,968 implying upside of around 16% from current levels. Major investment banks have issued similarly constructive forecasts, with targets generally ranging from 7,000 to 8,000.
Key factors supporting these projections include:
Despite the positive outlook, several risks warrant attention.
The S&P 500’s trailing price-to-earnings ratio stands at approximately 25 the highest level for a bull market in its third year on record. Elevated valuations leave less room for error and could amplify downside if earnings disappoint or economic conditions deteriorate.
The heavy weighting of technology stocks means the index’s performance is highly dependent on a handful of companies. If AI-related stocks experience a significant correction, the broader market could suffer disproportionately.
Trade policy, including tariffs on Chinese imports, remains a source of volatility. Additionally, questions about Federal Reserve leadership with potential changes at the Fed chair position add an element of uncertainty to monetary policy expectations.
Given this backdrop, investors may want to consider several strategic adjustments.
History shows that bull markets reaching their third year typically continue for several more years. Exiting the market based on timing concerns has historically proven costly, as the strongest gains often occur in the later stages of bull markets.
With market breadth improving and small-cap stocks showing renewed strength, diversifying beyond the largest technology names may capture opportunities in undervalued segments of the market. The Russell 2000 index recently hit all-time highs, suggesting investor appetite is broadening.
After three years of strong equity returns, many portfolios may have drifted away from target allocations. Periodic rebalancing helps manage risk while maintaining exposure to potential upside.
While the overall trend may remain positive, elevated valuations and policy uncertainties suggest volatility could increase. Having cash reserves and a clear investment plan can help investors stay disciplined during periods of market stress.
The S&P 500’s three consecutive years of double-digit returns represents a rare achievement, one that has occurred only 11 times in the past century. While history suggests the pace of gains may moderate in 2026, the underlying bull market remains intact, with potential for further upside based on historical patterns.
For long-term investors, the key takeaway is straightforward: time in the market consistently outperforms timing the market. The S&P 500 has always recovered from setbacks and reached new highs over extended periods. Maintaining a diversified portfolio aligned with your investment goals remains the most reliable path to building wealth.