The S&P 500 Is Chasing a Milestone That's Only Been Hit 9 Times Since 1926. Here’s What History Says Comes Next.

A lot can happen in 100 years. But some things don't occur very often. As a case in point, the S&P 500 (SNPINDEX:^GSPC) is on the verge of doing something relatively rare.

The widely followed index is up roughly 12% year-to-date, with a total return approaching 14%. It's within striking distance of achieving the third consecutive year of total returns of 15% or more. This milestone has only been hit nine times since 1926. Here's what history says could come next.

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Historical precedents

The first three-year streak of 15%+ gains for the S&P 500 occurred from 1942 through 1944. Technically, the S&P 500 didn't even exist then. The index didn't include 500 companies as it does today until 1957. However, a predecessor of the S&P 500 was created in 1926 that tracked 90 stocks.

What happened after this inaugural milestone? The index soared in 1945, the last year of World War II, delivering a total return of 36%. This performance also resulted in the second period of three consecutive years of 15% or more total returns. However, the trend ended in 1946, with the S&P 500's predecessor declining by 8%.

The third and fourth instances occurred between 1949 and 1951 and between 1950 and 1952. In 1953, though, the index's total return slipped by nearly 1%.

Investors had to wait more than four decades for the next streak. From 1995 to 1997, the S&P 500 generated total returns of 22% or more each year. It maintained momentum in 1998 and 1999, resulting in the sixth and seventh three-year periods with total returns of 15% or more.

The bursting of the dot-com bubble in 2000 ended the good times, though. The S&P 500 didn't produce total returns of 15%+ for three straight years again until 2019 through 2021. 2022 brought a bear market that ended the streak. However, the index regained strength between 2023 and 2025, marking the ninth time the milestone was reached.

In total, the S&P 500 delivered a positive return in the year following five of the 15% or more total return three-year periods (assuming the index doesn't plunge before the end of this year). It delivered a negative return in the year following the other four. That isn't much of a pattern.

What makes this time different — in both directions

Some investors could view the current market environment as similar to the mid-1990s. The internet was still in its early days then. There's a case to be made that artificial intelligence (AI) is also in its early stages.

Others, though, look at stock market valuations and think we're more like the end of the dot-com boom than the beginning. The S&P 500 Shiller CAPE (cyclically-adjusted price-to-earnings) ratio is at its highest level since early 2000.

But there are some reasons that today's market is different from both of those previous periods.

For one thing, the S&P 500 is concentrated in only a few companies at an unprecedented level. The top 10 companies (which include all the so-called "Magnificent Seven" stocks) now account for more than 39% of the index's weight.

Another difference is that the S&P 500 is generating exceptionally strong earnings growth. Again, though, much of this growth is coming from only a few companies.

Investors' smartest move

Statisticians would tell you that a sample size of eight usually isn't enough to base important decisions on. And that's especially true when the sample didn't provide a clear pattern.

Perhaps the best history lesson is to be prepared for any outcome. The stock market's momentum could continue in 2027, but it could come to an abrupt halt.

Being prepared includes setting aside cash to buy attractive stocks at a discount if the market pulls back sharply. It also includes being highly selective about which stocks you buy, with a key focus on valuation.

There's another instructive lesson from history that investors should also learn, though. The S&P 500 has always delivered positive total returns over the long run. Investors' smartest move, therefore, is to be patient.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.