Will the stock market continue to rise in 2026? Understanding this historical pattern is the only way to avoid paying the price.

Will the continuous three-year rally pull back? The data provides an unexpected answer

The stock market in 2025 once again proved its strength. As of now, the S&P 500 index(S&P 500) has gained over 14% this year, while in the previous 2023 and 2024, the index rose by 24% and 23%, respectively. Starting from the bottom in October 2022, investors have seen their assets double in just over three years — an exciting achievement.

However, as the market soars and hits new all-time highs repeatedly, a question begins to trouble investors: can this rally continue into 2026? Is it time to prepare for a downturn?

What does history tell us

Historical data of the S&P 500 offers an interesting perspective. Since tracking began in 1926, this index has generated an average total return of 55% every four years. More importantly, over the past 100 years, in 37 periods where the index rose for three consecutive years, 24 of those (about 65%) continued to rise in the fourth year(accounting for 65%).

In other words, after a three-year consecutive rise, the probability of a fourth-year increase actually exceeds 50%.

This pattern is crucial. Many investors, upon seeing the fact of “three consecutive years of gains,” instinctively react with “it should be time for a correction.” But real historical data shows that markets often deliver surprising performances.

Don’t be fooled by the “average”

Another easily overlooked detail: although the long-term average annual return of the S&P 500 is around 12%, it rarely operates exactly at this average. Over the past 99 years, the annual return has fallen within the 9%-15% range only 9 times — meaning the market is often either far above or far below the average.

The real operation of the market is: after a long upward phase, there tends to be a short-term sharp correction rather than steady climbing. This “jumping” pattern is very helpful in understanding the direction of 2026.

But bubble risks do exist

Of course, arguments supporting continued market growth also face realistic skepticism. Currently, stock market valuations are indeed somewhat high in historical terms, and huge investments in artificial intelligence(AI) are becoming a new market focus.

Data shows that last year, capital expenditure on AI-related projects by large tech companies contributed 1.1 percentage points to U.S. GDP growth in the first half of the year. In other words, current economic growth is, to some extent, supported by AI. If this bubble bursts, the consequences could be severe.

But here’s the question: even if a bubble exists, who can accurately predict when it will burst? The lesson from history is that the dot-com bubble burst in 2000, but the S&P 500 had already been rising for nine consecutive years before that, with five of those years seeing gains over 20%. Investors who were optimistic about the market at the end of 1998 but sold early due to fears of a bubble watched the index rise another 55% — almost impossible to perfectly time re-entry.

Why betting on “decline” is usually a losing game

Famous fund manager Peter Lynch once said: “More money is lost by investors trying to predict or prepare for market corrections than by the correction itself.” The logic behind this is simple — the long-term trend of the stock market is upward, and the costs of trying to avoid short-term fluctuations are often high.

While the three-year strong performance is impressive, in the long run, such a trend is rarely interrupted. The likelihood of continued upward movement outweighs that of a decline.

The stock market in 2026: no one can be certain, but the data looks more optimistic

So, will the S&P 500 continue to rise next year? No one can give a 100% certain answer. But if you had to bet on one side, the historical data clearly tilts upward. Investors who ignore this historical pattern may pay a high price for their conservatism next year.