S&P 500: 3-Year Rally Echoes Late 1990s Gains, but Risks Are Rising

With 10 weeks left in the 2025 calendar year, the S&P 500 (total return) has returned +14.47% YTD, which places the key benchmark on track for its 3rd year in a row of double-digit returns, with 2023 and 2024 SP 500 returns being over 25% annually.

• 2025: +14.40% YTD return for SP in 2025
• 2024: +27.04%
• 2023: +26.19%

Historically, how often does this pattern happen?

According to the historical SP 500 return data, infrequently.

The latest cluster was 2019 – 2021:

• 2021: +28.75% return for SP 500
• 2020: +18.2% return for SP 500
• 2019: +31.8% return for SP 500

Prior to that period, the longest cluster was the last 5 years of the 20th Century:

• 1999: +21.04%
• 1998: +28.58%
• 1997: +33.36%
• 1996: +22.96%
• 1995: +37.58%

Quick analysis: to my knowledge, there has never been 5 years in a row of SP 500 returns like the period from 1995 to 1999, but our data only goes back to 1970. That – I believe – is truly an unprecedented period of annual SP 500 returns.

2023 – 2025 instance and the 2019 – 2021 instance are slightly more common with +20% returns accompanied by a mid-teens annual return.

What’s the point of the article? Like late 2024 article about longer-term SP 500 stock returns, I thought 2025 might be a year of “PE compression” since the SP 500 EPS growth in 2023 and 2024 was only +2% in 2023 and +10% in 2024, yet the SP 500 returned 53% cumulatively over the 2 years.

The point being our 2025 SP 500 return forecast was too conservative, and I wasn’t expecting a +14% YTD return by November ’25.

Depending on how the last 10 weeks of the year progresses, the probability is growing that 2026 or 2027 is a more difficult year for investors.

The 5 years at the end of the late 1990’s was followed by a 50% correction in the SP 500, and an 80% correction in the Nasdaq beginning March, 2000 to March, 2003, and the three-year period following Covid was followed by 2022, when the SP 500 fell 18% and the Barclay’s Aggregate fell 13%.

What’s unspoken about these return patterns is that given current estimates today, 2026 is likely to see 14% EPS growth for the SP 500, which was written about on September 12th, 2025, which means we could very likely see a year of “PE compression” which means SP 500 earnings growth will be mid-teens, and the SP 500 could be something less, like 5% – 10% or even slightly negative, depending on the “macro”.

Summary / conclusion: After a 15-year secular bull market in stocks (mainly the SP 500 and the Nasdaq), I thought it was worth pointing out these patterns to readers that have emerged over the last 30 – 40 years.

Since 1970, the SP 500 has averaged 12.43% per year over those 55 years. When we get a series of consecutive years above that average, the probability improves that investors will likely see a year that is below (or well-below) that average.

2025’s SP 500 total return is better than I thought it would be a year ago, with two consecutive years of +25% returns.

Thanks for reading.

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Disclaimer: None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results.