Will the S&P 500 Soar in 2026? History Offers an Answer That's Compellingly Clear.

The S&P 500 has galloped higher over the past three years, advancing each time in the double digits -- and this has brought it to a 78% gain over that time period. What's led the charge? Investors have been bullish on growth stocks, particularly those in the high-potential field of artificial intelligence (AI). They've seen this new technology as one that may transform business operations and our daily lives -- and that may result in explosive growth for the companies involved as well as their shareholders.

A lower interest rate environment has also spurred enthusiasm among investors since this sort of backdrop is great for growth companies and the consumer. Companies may spend less on borrowing costs, and consumers, facing lower interest rates, are left with more money in their pockets to spend on discretionary purchases. All of this is positive for corporate earnings growth.

Now, in the early days of 2026, investors may be wondering if the S&P 500 will continue along this path and climb this year. History offers an answer that's compellingly clear.

Image source: Getty Images.

What may drive or weigh on growth this year

First, though, let's consider the elements that may drive or weigh on growth this year. After the spectacular performance of AI stocks in 2025, investors have questioned whether this may continue, especially since valuations have also soared. In fact, the entire market has reached a level it's only touched once before in its entire history -- and that was during the dot-com boom back in 2000.

We can see this through the S&P 500 Shiller CAPE ratio, an inflation-adjusted measure of stock prices in relation to earnings per share.

S&P 500 Shiller CAPE Ratio data by YCharts

This temporarily slowed the momentum of AI stocks late last year, as investors worried about the possibility of an AI bubble. Valuations haven't come down much from that point, suggesting these concerns could reappear in this new year. That said, demand for AI products and services remains strong, and to support this, data center giants continue to invest heavily in AI infrastructure. These AI players, from Alphabet to Meta Platforms, also have reported solid earnings growth quarter after quarter -- so market trends and earnings patterns offer us reason to be optimistic about ongoing AI strength. If this AI environment continues, AI stocks could power the market higher again in 2026.

The interest rate context also remains supportive of stocks, though economic trends -- if unfavorable -- could weigh on appetite for growth stocks in the months to come. So the economy will be a point to watch, as will government decisions and policies. Last year, President Donald Trump's decision to launch import tariffs proved to be a significant headwind for stocks. The S&P 500 dropped 11% from the start of March through the end of April as that story unfolded.

A look at history

Now, let's consider what history has to say about the S&P's possible performance this year. The index entered its third year of a bull market back in October. And research focused on past bull markets offers us reason to be optimistic about what's next.

A look at 11 past bull markets, from 1949 through 2022, shows that the fourth year of those markets generally was strong, with an average gain of more than 14%, according to research by Ryan Detrick of Carson Group. Meanwhile, going back 50 years, the five bull markets that made it to the three-year mark went on to gain for additional years -- the shortest lasting five years, the Carson research showed.

Will the S&P 500 climb again this year? History's answer is a strikingly clear "yes." This offers us reason to be optimistic about the year ahead, but it's still important to remember a couple of things. First, history isn't always right -- there are times it strays from past patterns, and any unexpected news could prompt the index to change course.

Second -- and the most important point of all -- regardless of the S&P 500's move during one particular year, over time it's always gone on to win. So, if you choose quality stocks and hold onto them over the long term, you, too, are likely to win -- no matter what direction the S&P 500 takes in 2026.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.