The S&P 500 has been on a tear, delivering three consecutive years of double-digit total returns. As we enter next year, Wall Street strategists are leaning bullish again, but what does history tell us about extending this winning streak?

The Historical Hurdle: Four Years of Double-Digit Gains?
Looking back at total annual returns since 1928, the market’s current run of double-digit gains (2023, 2024, 2025) is exceptionally uncommon.

Only five other periods have delivered three straight years of double-digit returns. And when such streaks do occur, they tend to persist. In five out of those six cases, the market delivered a positive fourth year, with only one instance ending in a bear market.


What Happens Next?
When the S&P 500 delivers three consecutive years of double-digit gains, history shows that year four has typically continued the trend. More often than not, the market still moves higher.

  1. The 1942-44 streak was followed by a +35.8% return in 1945.
  2. The 1949-51 streak was followed by a +12.3% return in 1952.
  3. The 1995-97 streak was followed by +28.6% in 1998 and +21% in 1999.
  4. The 2012-14 street was followed by a +1.4% in 2015
  5. The 2019-21 street was followed by a -18.1% in 2022.
Why Strategists Are Bullish (Again)
Despite high valuations, many leading Wall Street firms are setting ambitious targets. Deutsche Bank is leading the charge with a S&P target of 8,000 for the end of the next year. Their optimism hinges on three powerful, interconnected themes:

  1. The AI-Powered Earnings Boom: Corporate profits are expected to drive the market's next leg up. Analysts forecast robust double-digit earnings growth, fueled largely by the massive capital expenditure (CapEx) and productivity gains from Artificial Intelligence (AI) investment.
  2. Supportive Monetary Policy: The Federal Reserve is widely expected to continue its easing cycle, with more interest rate cuts on the horizon. Lower borrowing costs reduce financing expenses for companies, make stocks more attractive compared to bonds, and help support economic growth.
  3. Resilient Economic Growth: Fears of a recession have largely faded. Economists anticipate continued, albeit moderate, GDP growth. This “soft-landing” scenario, where inflation cools without a sharp economic contraction, is the Goldilocks backdrop needed for a sustained bull market.

What Could Go Wrong?
Even the most bullish strategists acknowledge significant risks that could derail the rally:

  1. Elevated Valuations: The S&P 500's Price-to-Earnings (P/E) ratio is high by historical standards, pricing in a high degree of optimism. This leaves a narrow margin for error. If corporate earnings or economic growth disappoint even slightly, it could trigger a sharp sell-off and P/E multiple contraction.
  2. Narrow Market Breadth: Market gains remain heavily concentrated in a few mega-cap technology stocks, a.k.a. the “Magnificent Seven.” While this is great for the overall index, it makes the market top-heavy and vulnerable. A significant correction in this handful of leading stocks could easily pull the entire S&P 500 down, even if the rest of the market is stable.
  3. Policy Shocks: If inflation unexpectedly re-accelerates, the Federal Reserve could pause or reverse its expected rate cuts, sending bond yields higher and putting pressure on stock valuations.

As we head into 2026, the Runnymede Team also favors bullish positioning. However, we fully recognize the heightened risk of an economic slowdown with elevated valuations.
Feature image by Gemini