Four Good Years in a Row: What History Says About Long Runs

The US stock market is on track for its fourth straight annual gain, currently up around 7.7% in 2026. For a lot of investors, that fact produces a specific feeling: unease. Surely something this good cannot continue. Surely we are due a fall.

That instinct is understandable and mostly wrong. This guide looks at what long positive runs have actually meant historically, why the instinct to fear them is misleading, and what a sensible response looks like given current conditions.

The gambler's fallacy, applied to markets

Start with the reasoning error, because almost everything else follows from it.

If you flip a fair coin and get four heads in a row, the chance of heads on the fifth flip is still exactly half. The coin has no memory. Yet people instinctively feel tails is "due".

Markets are not coin flips, but the same instinct misfires in a similar way. The market does not owe anyone a down year because it has had four up ones. Prices respond to earnings, interest rates and expectations, not to a sense of fairness about how long the good times have lasted.

Historically, positive years have been considerably more common than negative ones. Long runs of gains are therefore not anomalies to be feared; they are roughly what you would expect from an asset that rises more often than it falls. Streaks of five, six and more consecutive positive years have all occurred.

What actually ends a run

Bull markets do not die of old age. They end for identifiable reasons, and it is far more productive to watch for those reasons than to count years.

A recession. Corporate profits fall, and prices follow. This is the most common cause of a sustained decline.

A policy shock. Interest rates rising faster or further than expected forces a repricing of every asset.

Valuation meeting disappointment. High prices are not dangerous in themselves. They become dangerous when they are built on expectations that then go unmet.

A credit event. Something breaks in the financial system, usually somewhere leveraged that nobody was watching closely.

Notice that "it has been going up for a while" is not on that list. The duration of a rally tells you very little about its remaining life.

The honest concerns in 2026

Dismissing the streak-based worry does not mean there is nothing to worry about. There are real, specific concerns, and they are more useful than the calendar.

Concentration. This is the big one. The 7.7% gain has been driven substantially by an enormous wave of spending on artificial intelligence infrastructure. That means the index is less diversified than owning hundreds of companies implies. A change in the pace of that spending would affect a wide swathe of the market at once.

The rate backdrop. With the ten-year Treasury yield near 4.78% and the Fed possibly raising rates further, there is a genuinely competitive alternative to equities for the first time in years. Every risky asset has to justify itself against a near 5% risk-free return.

Inflation that will not finish. Above target for more than five years, with July at 3.4%. This limits how quickly the central bank could support markets if something went wrong.

Energy and geopolitics. Oil near $91 after a sharp weekly rise, driven by Middle East tension with no clear resolution.

Any of those could matter. None of them is "the market has gone up four years running".

Why late-stage rallies feel strange

There is a psychological pattern worth recognising, because it affects decision-making.

In the early part of a recovery, most people are sceptical. Gains are met with disbelief. By the fourth year, the mood has usually shifted. Explanations for why prices should keep rising are widely accepted. Caution starts to look like a failure to understand.

This is uncomfortable to sit with, because it is genuinely hard to distinguish between two situations that look identical from the inside: a durable trend that sceptics are wrong about, and an over-extended one that sceptics are early about.

The useful response is not to guess which it is. It is to notice whether your own behaviour has drifted. Most people take on more risk in year four than they did in year one, usually without deciding to. The position sizes creep up. The cash balance drifts down. The tolerance for speculative holdings rises.

That drift, rather than the market level, is what turns a normal correction into a personal disaster.

What sensible looks like

Rebalance rather than exit. If shares have risen substantially, they now represent a larger share of your portfolio than you originally chose. Trimming back to your intended allocation is not a market call. It is maintenance, and it mechanically sells some of what has done well.

Check your actual exposure. Many people hold several funds that turn out to own the same handful of large companies. Diversification on paper is not always diversification in practice, and concentration in a single theme is exactly the current risk.

Do not try to time the top. The cost of being out of a rising market has historically been larger than the cost of sitting through a decline, for anyone investing over a long horizon. Selling everything because a streak feels long is a decision most people come to regret twice: once when it keeps rising, and again when they cannot decide when to return.

Make cash productive. With policy rates at 3.50% to 3.75%, holding some cash no longer costs you what it did when rates were near zero. Dry powder has a genuine return while it waits.

For traders rather than investors

If you trade rather than hold, the streak is largely irrelevant to your decisions, but the underlying conditions are not.

A market driven by one dominant theme behaves differently. Correlations within that theme tighten, so apparent diversification vanishes precisely when it is needed. Volatility clusters around specific events - earnings, capital spending announcements, and macroeconomic data - rather than being spread evenly.

The practical adjustment is to size according to how the market is currently moving rather than how it moved during a calmer period. We cover this in position sizing when markets move quickly.

The conclusion

Four consecutive up years is not a warning sign. It is a fairly ordinary outcome for an asset class that rises in most years, and betting against it purely on the grounds of duration has been a reliably poor strategy across market history.

There are genuine reasons for caution in late 2026, and they are worth taking seriously: heavy concentration in a single spending theme, a risk-free rate near 5%, inflation that has been above target for five years, and an energy market being moved by geopolitics.

Those are the things to watch. The number of years on the streak is the least informative fact available, and it is the one that gets the most attention.

The difference between a correction and something worse

Since some decline is inevitable eventually, it is worth distinguishing between the two things people lump together.

A correction is a fall of roughly ten to twenty percent. These happen regularly, often more than once a year in some form, and they typically recover within months. They are usually caused by positioning being stretched rather than by anything fundamental changing.

A bear market is a deeper and more sustained decline, normally accompanying a recession or a major policy shock. These take considerably longer to recover from and are driven by falling corporate profits rather than by sentiment.

The distinction matters because the appropriate response differs. A correction is generally something to sit through, and for long-term investors sometimes an opportunity to add. A genuine profit recession justifies more thought about allocation.

Unfortunately you cannot reliably tell which is which at the start. They look identical for the first several weeks. Anyone claiming to distinguish them in real time is guessing with confidence.

This is precisely why a fixed process - rebalancing on a schedule, maintaining a chosen allocation - outperforms judgement for most people. It removes the need to make a call you are not equipped to make.

What long runs do to behaviour

The most underrated risk in a fourth consecutive positive year is not in the market. It is in the investor.

Extended good periods change people in predictable ways. Risk tolerance quietly expands. Positions that once felt large begin to feel normal. Cash balances feel like a drag rather than a cushion. Speculative holdings that would have seemed reckless three years ago get added because they have worked for everyone else.

None of these shifts is announced. There is no moment where someone decides to become more aggressive. It happens gradually, through a series of individually reasonable decisions, each one slightly bolder than the last because the previous one worked.

The result is that many investors carry their maximum risk at exactly the point when the market has risen the most and offers the least margin for error.

A useful exercise is to compare your current allocation with your allocation three years ago. If risk exposure has grown substantially and you never made a deliberate decision to increase it, that drift is worth examining. It is the single most controllable factor in how a downturn affects you.

The cost of getting out early

Finally, the counter-risk deserves equal weight, because articles about market caution rarely give it any.

Sitting out a rising market has a real and compounding cost. Someone who exited after a third consecutive gain, judging it overdue for a fall, would have missed this year's move entirely and would still be waiting for their re-entry point.

They would also face a harder problem than they expect. Having sold, the decision to buy back becomes psychologically difficult at every level. Lower, and it feels like catching a falling knife. Higher, and it means admitting the exit was wrong. Many people who sell defensively never fully return.

That is why the sensible responses to a long run are moderate ones - rebalancing, checking concentration, keeping some cash that now actually earns a return with policy rates at 3.50% to 3.75%. They keep you invested while reducing the consequences of being wrong, which is the only sustainable position when the future is genuinely unknown.

This article is general information, not financial advice. Do your own research or speak to a licensed professional before making money decisions.