Stocks are on track for a third straight year of stellar returns. Why a fourth isn’t out of the question.

Market Outlook - Analysts expect the S&P 500 to finish 2026 with an average price target just shy of 8,000, indicating a yearly gain of 15.9% excluding dividends [2] - Historical data shows that after strong market performance, the average return for the following year is typically lower, at 4.6% [3] - The S&P 500 has risen over 80% since the start of 2023, marking its best three-year return since 2021 [10] Performance Trends - The S&P 500 is on track to finish 2025 with a 17.8% advance, despite earlier volatility [6] - A third consecutive year of double-digit returns would be significant, as only four instances of such performance have occurred since 1949 [4] - The "Magnificent Seven" tech stocks now account for 35% of the S&P 500's value, indicating a concentration in market leadership [8] Investment Sentiment - Some analysts believe the market may be due for a breather in 2026, citing heavy reliance on AI-driven trades as a potential risk [7] - Fundstrat Global Advisors argues that historical patterns show strong performance can continue into a fourth year, with median three-year returns of 155% in similar past instances [12][13] - Continued investment in AI data centers is expected to boost corporate earnings across various sectors, suggesting a broadening of the market rally [14] Broader Market Indicators - The small-cap Russell 2000 index has risen over 13.6% this year, indicating positive performance outside the S&P 500 [15] - International stocks, represented by the MSCI All Country World ex-USA Index, have increased by 29.8% this year, outperforming the S&P 500 [16]