The S&P 500 Just Had Its Best Quarter Since 2020. The Stock Market Will Make a Big Move Next if History Repeats.

The S&P 500 (SNPINDEX: ^GSPC), commonly regarded as the best benchmark for the entire U.S. stock market, advanced 15% in Q1 2026 despite economic uncertainty created by the Iran conflict. That was the index's best quarterly performance since it added 20% in Q2 2020.

What happened next? After gaining 20%, the S&P 500 skyrocketed 39% during the next 12 months. Admittedly, one data point hardly qualifies as a trend. But history still says the stock market will climb much higher by July 2027, and Wall Street analysts generally agree.

Here's what investors should know.

Image source: Getty Images.

History says the S&P 500 will increase 13% by July 2027

Since 2011, there have been 10 instances when the S&P 500 achieved quarterly returns of at least 10%. That includes the most recent quarter. Past performance is never a guarantee of future results, but we can examine the past nine instances to make an educated guess about what the stock market might do next.

The following chart lists the quarters since 2011 in which the S&P 500 increased at least 10%. It also shows how the index performed during the subsequent 12-month period.

Data source: YCharts.

As shown in the chart, when the S&P 500 has gained at least 10% in a quarter, the index has returned an average of 13% in the next year. That's slightly better than its annual return of 12% in the past 15 years.

What does that tell us about the future? The S&P 500 closed at 7,499 when the first quarter ended on June 30. If the index's performance matches the historical average, it will climb 13% to 8,474 by July 2027.

Wall Street says the S&P 500 will increase 19% by July 2027

Wall Street expects substantial upside in the S&P 500 in the next year. The consensus forecast (calculated by aggregating the median target price on each stock in the index) says the S&P 500 will hit 8,918 by July 2027, according to FactSet Research. That implies 19% upside from its current level of 7,499.

The driving force behind analysts' confidence is the expectation that S&P 500 companies will continue to deliver strong financial results. In total, S&P 500 earnings increased 28% in Q1 2026, the fastest growth since Q4 2021. And the Wall Street consensus says S&P 500 companies will report 24% earnings growth for the full year.

Analysts are particularly optimistic about the technology sector, where earnings increased 55% in Q1 2026 because of robust demand for artificial intelligence infrastructure. The largest contributors to that earnings growth were Nvidia and Micron Technology. The Wall Street consensus says technology companies will report 48% earnings growth for the full year.

Where should investors put their money? While chipmakers Sandisk, Micron, and Intel led the S&P 500 higher during the first half of the year, Wall Street now sees more upside in the underperforming software industry. Palantir, Intuit, Autodesk, and Oracle are four of the 10 most undervalued stocks in the S&P 500 based on their median target prices, per FactSet Research. Netflix also ranks among the top 10.

Data source: FactSet Research, YCharts. The stock prices and median target prices shown in the chart are current as of June 30.

In lieu of individual stocks, an S&P 500 index fund would be a good option for investors who prefer a less active approach. The Vanguard S&P 500 ETF is a particularly attractive choice because it has a very low expense ratio of 0.03%, which means shareholders will pay just $3 per year on every $10,000 invested in the fund.

Alternatively, investors who want more exposure to the technology sector should consider the Invesco QQQ Trust, a fund that tracks the performance of the Nasdaq-100, a growth-focused index that includes 100 of the largest companies listed on the Nasdaq stock exchange. Whereas technology stocks account for 38% of the S&P 500, they account for 67% of the Nasdaq 100.

Trevor Jennewine has positions in Nvidia, Palantir Technologies, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Autodesk, FactSet Research Systems, Intel, Intuit, Micron Technology, Netflix, Nvidia, Oracle, Palantir Technologies, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.