The S&P 500 has accomplished something remarkable. With a 16.4% gain in 2025 following returns of 26.2% in 2023 and 24.5% in 2024, the benchmark index has delivered three consecutive years of double-digit returns—a statistical feat known as a "triple-double" that has occurred only six times since the 1940s.

For investors riding this extraordinary run, the natural question is whether the streak can continue. History's answer is sobering: after achieving triple-double status, the S&P 500's average fourth-year return drops to just 4.6%—well below the long-term average of roughly 10%. And the range of outcomes includes some genuinely painful scenarios.

The Historical Record

Since 1949, the S&P 500 has achieved three consecutive years of double-digit gains in six distinct periods. Examining what happened next provides crucial context for 2026:

1963-1965, followed by 1966: After three strong years, 1966 brought a -10.1% decline as the market corrected from elevated valuations.

1995-1997, followed by 1998: The dot-com boom was just getting started. The index surged another 28.6%, extending the streak to four years—but the eventual reckoning in 2000-2002 would be brutal.

1996-1998, followed by 1999: Another 21.0% gain before the bubble burst. Those who rode the wave to the top faced a 49% drawdown over the next three years.

1997-1999, followed by 2000: The music stopped. The S&P 500 fell 9.1%, beginning a three-year bear market.

2012-2014, followed by 2015: A flat year with a 1.4% total return. Not a crash, but disappointing after the prior run.

2019-2021, followed by 2022: The most recent example ended in a -19.4% bear market as inflation surged and the Fed began aggressive rate hikes.

What the Averages Reveal

Across these six episodes, the fourth-year average return of 4.6% masks significant dispersion:

  • Best case: The late 1990s showed that momentum can persist, with returns exceeding 20% in some fourth years.
  • Worst case: The 2022 example demonstrates that a significant bear market is possible.
  • Base case: Modest single-digit returns or flat performance appears most common.

The data suggests that while a fourth consecutive year of double-digit gains is possible, it's historically rare. More likely outcomes include either a correction or a "breather" year with minimal gains.

Why Valuation Matters

The current setup carries additional concerns that weren't present in all prior episodes. The Shiller P/E ratio—which measures prices relative to 10-year average earnings—currently hovers near 40, a level only exceeded during the peak of the 1999 tech bubble.

Valuation extremes don't necessarily predict short-term returns. The market can stay expensive for extended periods, as the late 1990s demonstrated. But historically elevated valuations have been associated with lower long-term returns and increased vulnerability to negative surprises.

"When the CAPE ratio exceeds 35, forward five-year returns have historically averaged just 2-3% annually," notes one prominent market analyst. "We're well above that threshold."

The Bull Case for 2026

Despite the historical headwinds, bulls point to several factors that could support a fourth year of gains:

Earnings growth: Corporate profits are expected to grow 10-12% in 2026, providing fundamental support for higher stock prices. If companies deliver, valuations could compress even as prices rise.

Fed easing: Interest rate cuts, whenever they arrive, typically support equity valuations. The prospect of lower rates could offset some valuation concerns.

AI investment cycle: Unlike the dot-com era, today's technology boom is generating real earnings for many companies. The multi-year AI infrastructure buildout provides a genuine growth catalyst.

Broadening rally: The 2025 rally was heavily concentrated in large-cap tech. If gains spread to other sectors—small caps, value stocks, international markets—the overall market could find additional support.

The Bear Case for 2026

Against these positives, bears highlight substantial risks:

Valuation reversion: Elevated valuations tend to compress over time. Even with solid earnings growth, multiple contraction could drag returns toward zero or negative territory.

Economic uncertainty: Trade policy, Fed leadership transition, and geopolitical risks create multiple potential catalysts for a correction.

Positioning: Investor sentiment is historically optimistic, with surveys showing the highest bullishness in years. When everyone is bullish, who's left to buy?

Historical precedent: The 2022 example is recent and relevant. That decline came after a similar three-year run and caught many investors off guard.

What Wall Street Expects

Major financial institutions have coalesced around cautiously optimistic targets for 2026. Goldman Sachs, Morgan Stanley, and others have set year-end S&P 500 targets in the 7,000-7,200 range, implying gains of 5-7% from current levels.

These forecasts align with historical fourth-year averages. They suggest Wall Street strategists are aware of the headwinds but unwilling to predict an outright downturn.

How to Position

For long-term investors, the triple-double history suggests several prudent approaches:

  • Temper expectations: After three exceptional years, a more modest 2026 would be historically normal, not a disaster.
  • Diversify: Concentration in the stocks that led the 2023-2025 rally may not be rewarded going forward.
  • Rebalance: If equities have grown to an outsized portfolio allocation, bringing them back to target weights locks in gains.
  • Stay invested: Market timing is notoriously difficult. Missing the best days can devastate long-term returns.

The Bottom Line

The S&P 500's triple-double achievement is a testament to the power of the post-pandemic recovery and the AI investment boom. But history counsels humility about what comes next. With fourth-year returns averaging just 4.6% and significant variability around that mean, investors should prepare for a more challenging environment than the exhilarating run of the past three years. The question isn't whether the bull market is over—it's whether the pace of gains can possibly continue.