U.S. stocks have surged 78% over the past three years, but this hasn’t stopped Wall Street analysts from remaining optimistic about the future. However, this year’s optimism is mixed with significant caution. Sam Stovall, Chief Investment Strategist at CFRA, advises investors to “lower their expectations slightly” and maintain a “modestly bullish” stance as the market faces a historically challenging midterm election year. According to the average forecast of strategists, the S&P 500 is expected to rise 9.2% in 2026, in line with the average annual return for this century, but significantly lower than the strong consecutive gains of 24%, 23%, and 16% achieved in the previous three years.
Historical data provides mixed signals for the current market. Stovall points out that the average expected gain from strategists aligns with historical performance in the fourth year following three consecutive years of double-digit growth. However, recent history is not encouraging: after the last two instances of at least three consecutive years with gains of 10% or more, the following years (2015 and 2020) both saw market declines. If the S&P 500 rises another 10% this year, it would mark the best four-year performance span since 1999.
The bullish camp’s reasoning is primarily based on expectations of accelerated U.S. economic growth in the first half of the year, arguing that tax cuts, deregulation, and the ongoing artificial intelligence investment boom will collectively drive the economy. However, bearish or cautious views focus on elevated valuations and the risk that capital expenditures may begin to drag on corporate profits.
History also provides a cautious basis for market performance in midterm election years. Data shows that in midterm election years, the average stock market gain is only 3.8%, with a probability of rising at just 55%, which Stovall describes as “not much better than a coin toss.” Nevertheless, corporate earnings may provide crucial support for the market. Earnings growth is projected to accelerate to nearly 14% in 2026, compared to 12% in 2025.
Looking back at this bull market, the S&P 500 has risen 98% from its low in October 2022 over approximately 36 and a half months. Ari Wald, Chief Technical Strategist at Oppenheimer, notes that historically, there have been eight bull markets that lasted at least three years. But for the next phase, historical guidance is ambiguous: after a bull market enters its 39th to 51st months, market performance has been mixed. Wald remains optimistic, setting a year-end 2026 target of 7700 for the S&P 500. He believes typical warning signs before the end of a bull market—such as narrowing market breadth, defensive stocks leading gains, and tightening credit conditions—have not yet appeared. He also draws a parallel to the late 1990s, pointing out that 1998 was also a midterm election year following consecutive strong gains and, driven by tech stocks, ultimately rose 27% for the full year.
However, not all institutions are this aggressive. Adam Parker, founder of Trivariate Research, notes that in the past 100 years, there have been only three instances where the market achieved double-digit gains for four or more consecutive years. Therefore, statistically speaking, gains over the next year are likely to be more moderate. His baseline view for 2026 is “modest gains,” expecting earnings per share (EPS) growth of about 10%, below the market consensus, but he is not pessimistic about the medium- to long-term outlook. Parker calculates that if EPS grows at an average annual rate of 10% in the coming years with stable valuations, the S&P 500 could approach 10,000 by 2030.
