Is a Market Correction Coming Soon? Historical Patterns Suggest Yes for 2026

After three consecutive years of exceptional gains, the S&P 500 is flashing warning signals that suggest a market correction may be approaching. From 2023 through 2025, the index delivered remarkable returns of 26.3%, 25%, and 17.9% respectively—a performance that has occurred only four other times in the past century. History reveals a consistent pattern: these extraordinary bull runs are typically followed by periods of weakness, whether modest pullbacks or outright bear markets. Understanding what happened after previous market corrections like these can help investors prepare for what may lie ahead in 2026.

The Rare Phenomenon of Three Consecutive Years of Double-Digit Gains

The combination of recovery from 2022’s inflation shock and the emergence of artificial intelligence created ideal conditions for stocks to flourish. After U.S. stocks suffered through a disastrous 2022—when both the S&P 500 and long-term Treasury bonds fell more than 20% from peak to trough—investors faced a turning point. As inflation cooled and the Federal Reserve ended its aggressive rate-hiking cycle, optimism gradually returned. By late 2022, stocks had bottomed out. When 2023 arrived with more favorable market conditions and the beginning of the AI boom, an explosive rally took hold, particularly in technology stocks and the “Magnificent Seven.”

Achieving three consecutive years of 15%-plus returns proves exceptionally rare. Over the past 100 years, this milestone has been reached only five times total. The most recent occurrence was just a few years ago—during 2019 (up 31.5%), 2020 (up 18.4%), and 2021 (up 28.7%). Though many may have forgotten amid the pandemic’s initial shock of a 30% plunge in 2020, the S&P 500 recovered completely by August and then spent the remainder of the year establishing new all-time records.

What History Reveals About Market Reversals After Bull Runs

Looking further back reveals troubling patterns that should concern today’s investors. The years 1950 through 1952 saw consecutive gains of 31.7%, 24%, and 18.4%, driven by post-World War II economic expansion as the nation shifted from wartime manufacturing to consumer goods production. Yet this was followed by modest returns—the S&P 500 dropped roughly 8% in 1946, then generated only about 5% in both 1947 and 1948. The total three-year gain after the bull run amounted to merely 2-3%.

The late 1990s tech boom presented an even more dramatic example. From 1995 through 1999, the S&P 500 surged 37.6%, 23%, 33.4%, 28.6%, and 21%—five consecutive years of exceptional performance as internet valuations reached historic extremes. When the bubble burst in 2000, the recovery process stretched on for nearly three years. The S&P 500 shed nearly 50% of its value, while the Nasdaq 100 plummeted even more drastically, losing approximately 80% and falling back to 1997 levels.

Similarly, during the early 1940s, strong wartime economic activity and industrial production drove four consecutive years of gains: 1942 (up 20.3%), 1943 (up 25.9%), 1944 (up 19.8%), and 1945 (up 36.4%). These followed three down years before, so substantial value had accumulated in markets. Yet after 1952, a 15% correction arrived in 1953 along with a brief recession. Recovery did eventually follow—the S&P 500 soared 52% and 31% in 1954 and 1955.

Following the third consecutive strong year in 2021, when zero interest rates and massive COVID stimulus flooded into markets, inflation finally caught up with the economy. The Federal Reserve struggled to respond, and both equities and bonds declined significantly—a reminder that every bull market eventually exhausts itself.

Preparing Your Portfolio Before the Next Correction Arrives

The lesson from history is unmistakable: each instance of three consecutive years of 15%-plus returns in the S&P 500 has been followed by either an extended period of minimal gains, a more modest market correction, or an outright bear market. The good times invariably ended, and difficult periods followed. While these runs occasionally extended to a fourth or fifth year, making further gains possible, current economic indicators suggest this scenario is increasingly unlikely heading into 2026.

Given this historical precedent, investors should adopt a more cautious stance now. This means considering strategic shifts toward value stocks, international equities, bonds, precious metals, or other strategies less dependent on technology and growth sectors. A market correction coming is no longer merely a theoretical possibility—it represents a likely outcome based on cyclical patterns that have repeated throughout the past century.

Waiting until conditions deteriorate further before adjusting your portfolio could prove costly. By repositioning now while markets remain elevated, you can avoid being caught off-guard when the inevitable market correction arrives. History doesn’t repeat itself exactly, but it does demonstrate that after extraordinary bull markets come periods of consolidation or decline. The time to prepare is before that turning point, not after.