With 2025 officially in the books, it’s hard not to feel grateful for the remarkable run in U.S. equities. The S&P 500 finished the year up over 15% – marking three consecutive years of 15%+ gains (following strong performances in 2023 and 2024).
This kind of streak is truly rare. Since 1950, the S&P 500 has only achieved three straight years of 15%+ returns a handful of times – most notably during the late 1990s tech boom.
So, what does history tell us about the year that follows?
It’s a mixed picture: we’ve seen both continued upside and sharp pullbacks. But on average, the subsequent year’s returns have been noticeably more modest – around 4%, with a median closer to 5% – well below the long-term historical average of ~9%.
No one has a crystal ball, and I’m not predicting trouble ahead. Exceptional runs like this often reflect strong fundamentals (think AI-driven growth today, just as the internet fueled the ’90s).
That said, after one of the strongest three-year stretches in market history, it’s prudent to temper expectations and prepare for potentially more moderate – or even volatile – returns in 2026.
Staying diversified, rebalancing where needed, and focusing on the long term remains the best approach.
