Dow’s 3-Year Winning Run Isn’t a Crash Signal, Still 49% Odds of Double-Digit Gains

Three straight years of double-digit gains have not raised the odds of a Dow Jones Industrial Average pullback. That is the conclusion of MarketWatch contributor Mark Hulbert. The Dow’s historical baseline chance of another double-digit year still sits at 49%.

A narrative has spread on Wall Street that the streak alone makes a reversal overdue. Hulbert calls that reasoning the gambler’s fallacy, the same error behind coin-flip superstitions.

The Gambler’s Fallacy Behind the Crash Talk

Hulbert compares the market to a coin flip. A coin that lands heads several times in a row is still 50% likely to land heads again.

He points to 129 years of Dow data going back to the late 1890s. The odds of a double-digit year hover near 49%, regardless of how many strong years came before it. Historically, that baseline has barely moved even after multiple consecutive winning years.

Investors weighing whether a real downturn is brewing can compare Hulbert’s data with Cramer’s buyable crash framework. That guide separates mechanical sell-offs from systemic ones.

What the Research Shows About Crash Odds

Hulbert also cites research from Harvard University and the University of Hong Kong. The research uses trailing two-year returns to estimate crash risk. State Street Markets, working with the Harvard researchers, applies that framework to calculate current odds.

The current probability of a 40% drop over the next two years sits at 19%. That compares with a five-year average of 26%. Crash odds, in other words, are currently below normal.

Other Wall Street voices point to different warning signs. Some traders see echoes of the dot-com bust in the recent AI stock rotation. That is a separate concern from the streak-based narrative Hulbert addresses.

What About Other Risks?

Hulbert stresses that his model only reflects trailing returns. It does not account for other risks, including stretched valuations across US equities.

Wall Street sentiment remains split heading into the back half of the year. Fundstrat’s Tom Lee’s correction call shows some strategists still want a pullback before further upside. Meanwhile, raised S&P 500 forecasts from JPMorgan and CFRA signal broader confidence in the rally continuing.

For now, Hulbert’s bottom line holds. The Dow’s odds of finishing 2026 with a double-digit gain remain 49%. That is no better and no worse than in any other year.