Historically, the S&P 500 has returned an average of 184% during bull markets.
The U.S. stock market has performed surprisingly well this year. The benchmark S&P 500 (^GSPC +0.21%) is up 17% in 2025 despite severe turbulence during the spring after President Trump shocked Wall Street with his sweeping tariff strategy.
The S&P 500 is on track to achieve double-digit returns for the third straight year, something it has only done five times since its inception in 1957. Past incidents were often followed by muted returns, with the index adding an average of 3% during the next year. But this time could be different.
The S&P 500 is currently in the middle of its eleventh bull market, and history says there is more upside on the horizon. Here’s what investors should know.
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The S&P 500 bull market is relatively young by historical standards
The S&P 500 hit a bear market low on Oct. 12, 2022, then staged a strong recovery as post-pandemic inflation moderated, the economy regained its momentum, and investors turned their attention to the artificial intelligence (AI) revolution. In hindsight, that low point marked the onset of a new bull market, the eleventh one since the S&P 500 was created in 1957.
Since October 2022, the S&P 500 is up 92%, which means the current bull market is relatively young by historical standards. The index has returned an average of 184% during past bull markets, according to Yardeni Research. In other words, the S&P 500 will return another 92% before the current bull market ends if its performance matches the historical average.
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What does that mean for 2026? The S&P 500 has added an average of 21% annually during past bull markets, so history says the index could deliver double-digit gains for the fourth consecutive year in 2026. Of course, past returns are never a guarantee of future results, but Wall Street is also optimistic about the coming year.
Wall Street anticipates another strong performance from the stock market in 2026
Wall Street analysts collectively have more than 12,600 ratings on different stocks in the S&P 500. FactSet Research aggregates the median target price for every stock to create a “bottom-up” forecast for the index. Using that method, Wall Street expects the S&P 500 to reach 7,968 during the next year, which implies 16% upside from its current level of 6,864.
Some Wall Street analysts are more optimistic. At the top of that list is Julian Emanuel at Evercore, who thinks excitement about artificial intelligence could drive the S&P 500 to 9,000 next year if the Federal Reserve helps to “overstimulate the economy” with interest rate cuts. That forecast implies 31% upside from the current level.
However, other Wall Street analysts are more pessimistic. The most conservative outlook comes from Savita Subramanian at Bank of America, who believes fewer interest rate cuts and increased capital expenditures (which will drag on earnings growth) will leave the S&P 500 at 7,100 next year. That forecast implies just 3% upside from the current level.
At this point, the conservative scenario from Bank of America seems more plausible. The Federal Reserve only anticipates one quarter-point rate cut in 2026. And while earnings growth is projected to accelerate by a percentage point next year, the market has likely discounted that information. The S&P 500 trades at 22.4 times forward earnings, a material premium to the five-year average of 20 times forward earnings.
The big picture
The S&P 500 bull market is young by historical standards, which means robust returns are possible in 2026. But the current market environment still warrants caution. Valuations are stretched, and President Trump’s tariffs could hinder economic growth. Investors should avoid momentum stocks and focus on reasonably priced stocks whose earnings are likely to be materially higher five years from now.