Can the Stock Market Keep Climbing in 2026? Ignoring This Trend Could Cost Investors Dearly.

Investors are having another banner year in 2025. The S&P 500 (SNPINDEX: ^GSPC) is up more than 14% year to date as of this writing. That follows exceptionally strong years in 2023 and 2024, when the index returned 24% and 23%, respectively. All told, someone who bought an S&P 500 index fund, such as the Vanguard S&P 500 ETF (NYSEMKT: VOO), at the market's bottom in October 2022 has nearly doubled their money in just over three years.

With the stock market on an incredible bull run and the S&P 500 trading near its all-time high, some investors may wonder if stocks can continue to climb in 2026. While the market is always forward-looking, it can be helpful to look back at historical data to make more confident decisions. And investors who ignore this historical trend in 2026 may end up regretting it.

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Can the market rally for four years straight?

Most investors know that stocks, as a group, tend to go up more often than they go down. If you look at any given year since Standard & Poor's first started tracking a market-weighted index of stocks (in 1926), the index climbs about three out of every four years.

That stat may give investors pause. We have just experienced three consecutive years of stock market growth. So, it must be due for a pullback, right?

The average four-year total return for the S&P index over the last 100 years is 55%. As mentioned, the S&P 500 has nearly doubled from its October 2022 lows. It's up about 75% since the start of 2023. 2026 should revert to the mean, right?

However, investors reading into those statistics may be overlooking another key detail. The stock market tends to disregard averages. For example, the average total return of the S&P index in any given year is about 12%. It's produced returns between 9% and 15% just nine times since 1926. Instead, it often has extended periods of gains followed by short periods of sharp corrections.

That's why this historical stat is also important to consider. The S&P index notched 37 three-year periods where it increased in each year since 1926. In 24 of those 37 historical periods (65% of the time), the index climbed for a fourth consecutive year.

While long-term returns are relatively predictable based on historical data, short-term returns -- like whether the S&P 500 will climb higher in 2026 or not -- are much harder to predict. But the historical data suggest a fourth consecutive year of gains is more likely than not.

This stock market looks expensive

Some may argue that 2026 may defy the odds of a fourth consecutive year of gains, as the stock market, as a whole, appears historically expensive. Indeed, in almost any way you measure it, the S&P 500 appears pricey.

Furthermore, many are concerned about the potential for an artificial intelligence (AI) bubble. Big tech companies are investing substantial sums of money in AI-related projects. In fact, J.P. Morgan analysts estimate AI capital expenditures contributed 1.1 percentage points of growth to the U.S. GDP in the first half of the year. In other words, AI is propping up the entire economy, not just the stock market. Popping the bubble could lead to a big crash in stock values.

But even if we are in an AI bubble, it's impossible to know when the bubble will pop. The dot-com bubble popped in 2000, but the S&P 500 produced nine consecutive years of positive total returns leading up to it, including five consecutive years of returns exceeding 20%.

Investors who sold out of their holdings at the start of 1998 after the historic bull run of the mid-1990s saw the S&P 500 climb another 55%. They'd have to have timed their reentry almost perfectly to get back into the market at prices better than they saw when they sold.

That is to say, it's hard to bet against stocks and come out ahead. The long-term trend is for stocks to keep climbing over the long run, and three consecutive years of strong results rarely slow down that trend. As famed investor Peter Lynch (who oversaw positive returns for the Fidelity Magellan Fund for 13 consecutive years) said, "Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves."

So, yes, the stock market can continue to climb in 2026. Whether it will, nobody knows, but I wouldn't be betting against it.

Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.