Stellar Market Returns Rare After Three Strong Years, History Shows

After three consecutive years of stellar gains exceeding 15%, the stock market may be due for a breather. Historical data stretching back to 1926 suggests that four straight years of such strong returns are exceptionally rare, occurring only three times in nearly a century. According to SimCorp's Melissa Brown, citing data from Stocks, Bonds, Bills and Inflation (SBBI), the likelihood of another double-digit surge in 2026 is slim.

Historical Context: The Rarity of Four-Year Streaks

The S&P 500 posted annualized returns of 26% in 2023, 25% in 2024, and approximately 18% in 2025. While these numbers have delighted investors, history cautions against expecting a repeat. Brown notes that since 1926, there have been only three instances where the market delivered four consecutive years of returns above 15%. This pattern underscores the cyclical nature of markets and the tendency for mean reversion.

What the Data Says About 2026

Brown highlights that the fourth year following a three-year annualized return of 20% or more has an average return of just 3.9%—significantly below the long-term average of 11.8%. Year-to-date, the S&P 500 has risen only 8%, which aligns with expectations for a single-digit annual return. "I think that's probably what we would expect for the whole year," Brown said. "That doesn't necessarily mean a drawdown, but it does mean it would be extremely unusual to have a return of more than, say, 10% for the year."

Factors That Could Defy History

Of course, historical patterns are not guarantees. The ongoing artificial intelligence boom could continue to propel stocks higher, potentially breaking the historical trend. However, Brown cautions that even if 2026 sees low-double-digit growth, the probability of maintaining such momentum into 2027 diminishes further. "Things just can't grow forever," she warned. "We're clearly closer to the end of the rally than the beginning."

Implications for Investors

For investors, the message is clear: temper expectations. The past three years have been exceptional by any measure, and a period of below-average returns—or even a mild correction—would be consistent with historical norms. Diversification and a focus on long-term fundamentals may serve investors better than chasing momentum. As Brown's analysis shows, the market's own history suggests that the best days of this cycle may be behind us.

Key Takeaways

1. Only three instances of four consecutive years with >15% returns have occurred since 1926.
2. After three strong years (2023-2025), the average return in year four is just 3.9%.
3. Year-to-date 2026 S&P 500 return of 8% aligns with expectations for a single-digit annual gain.
4. AI-driven stocks could defy history, but the rally is likely closer to its end than its beginning.

Sources: CNBC