The S&P 500 Is Chasing a Milestone That's Only Been Hit 9 Times Since 1926. Here’s What History Says Comes Next.

The S&P 500 index is nearing a rare milestone, having achieved a 15% or higher total return for three consecutive years only nine times since its inception in 1926. The index surpassed this milestone for the third time in a row in 2023, with a total return of 14%. Historically, the first instance occurred from 1942 to 1944, a period marked by World War II.

Following this, the index experienced a significant surge in 1945, delivering a total return of 36%. However, this momentum did not last, as the index declined by 8% in 1946. The next two streaks of three consecutive years of 15% or more total returns happened between 1949 and 1951 and between 1950 and 1952. The last streak of three years with total returns of 15% or more occurred from 1995 to 1997.

This pattern, of five successful periods and four failures, suggests that a positive return in the year following the milestone has occurred only five times out of the nine instances. The current market environment could be reminiscent of the mid-1990s, with the growth of technologies like artificial intelligence. However, unlike those previous periods, the S&P 500 is now heavily concentrated in a few companies, accounting for over 39% of the index's weight.

Despite this, the S&P 500 has always delivered positive total returns over the long run, making patience and being selective about investments a prudent strategy.