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The S&P 500 is up 16.2% year to date on the back of 24% return in 2023 and 23% return in 2024. The S&P 500 is now up 78% since the end of 2022. All signs point to the market remaining strong through the rest of the trading days in 2025. But, racking up three straight years of double digit gains isn’t as common as you might think. This is only the third time since 1952 that the S&P 500 has gained 10% or more in three consecutive years.
Though valuations are getting pricey, stocks could have another winning year in 2026. That will depend on whether the Fed continues to cut rates, the strength of the economy, whether AI demand remains on track, and other factors, like corporate profits, tariffs, and public policy. But, cracks are beginning to show – unemployment is rising, inflation remains high and deficits are soaring. For those who have not been keeping track – the current deficit of $38 trillion means $1 trillion in annual interest payments. Of course, the longer the streak of double digit gains continues, the harder it will be to sustain it as earnings growth will have to keep pace.
2026 could be a very interesting year in the stock market.