SPX's Double-Digit Win Streak is a Warning Sign to Some

• After three straight double-digit years, the SPX averaged only 3.03% returns the following year with 43% positive outcomes, versus typical 9.58% returns with 73% positive outcomes since 1950
• Second-year presidential cycle returns average just 4.6% annually, with January-June showing a 2% average loss and only 53% positive outcomes during this six-month period
• Only two prior instances match current conditions (1997 and 2021): SPX gained 26% after 1997 but fell 19% after 2021, with January performance proving a reliable early indicator in both cases

Summary

Key Finding: The S&P 500 Index (SPX) has posted three consecutive years of double-digit gains—24%, 23%, and 16% over the past three years—a rare occurrence that has happened only eight times since 1950. Historical data suggests this winning streak may signal underperformance ahead.

Historical Performance:

After three straight double-digit years, the SPX has averaged just 3.03% returns in the following year, significantly below the typical 9.58% annual average. Only 43% of subsequent years were positive, compared to the normal 73% success rate. January following such streaks has averaged a -1.05% loss versus the typical +1.07% gain.

Presidential Cycle Concerns:

2026 marks the second year of Trump's presidency, historically the weakest period of the four-year presidential cycle. Second-year returns average just 4.6% with only 53% positive outcomes. The first half of year two is particularly concerning, averaging a -2% loss from January through June.

Historical Precedents:

Only two prior instances mirror the current situation (1997 and 2021). The SPX gained 26%+ in 1998 but fell 19% following 2021. January performance proved predictive: +1% in January 1998 preceded gains, while a -5% January 2022 signaled trouble ahead.

Market Implications:

Investors should closely monitor January 2026 performance as a potential early indicator. The combination of three consecutive double-digit years and the second-year presidential cycle headwind creates significant seasonality challenges for stocks, particularly through mid-2026. However, historical data shows mixed outcomes, with some fourth-year instances still producing strong double-digit gains.