What History Tells Us About the Fourth Year of a Bull Market
Just because the bull is aging, doesn’t mean it’s dying. What history tells us about the fourth year of a bull market, in this week’s Fastest 4 Minutes in Finance.
The Current Bull Market: Strong Gains Since October 2022
The beginning of the current bull market was October, 2022. The S&P 500 Index has surged 80% since that time. The Index has posted double-digit gains for three straight years. As we’ve pointed out in previous videos, it is extremely rare to experience those kinds of returns for 4 straight years.
However, it is pretty common for the 4th year of a bull market to be strong.
Historical Data: Fourth-Year Bull Market Performance Since 1949
Take a look at this chart from LPL Research.
This shows all of the bull markets that lasted at least 4 years going back to 1949. You can see 7 of the 8 times were positive in the fourth year. The average gain in the fourth year is 12.8%. In fact, on average, the fourth year of a bull market is stronger than the third year.
Where We Are Now: 2026 Market Momentum and AI Tailwinds
That brings us back to the current bull market. It’s unlikely we would have a strong fourth year than the nearly 18% return we enjoyed in 2025. But, the fourth year of the current bull market is up about 5% since October, and LPL Research believes policy tailwinds and the continue momentum behind AI buildout will keep the bull charging.
Federal Reserve Rate Cuts and Market Impact
One of those policy tailwinds is the expectation that the Federal Reserve will continue to cut interest rates in 2026. History tells us that could be a huge catalyst for the stock market, although it greatly depends on WHY the Fed cuts.
Generally, the Fed would cut interest rates when growth is slowing. The theory would be if there is a threat of a recession, lower interest rates might help spur borrowing, which would increase spending. But, the Fed sometimes cuts in an effort to return data to the norm. In this recent cycle, the Fed began raising rates 5 years ago to cool inflation. It largely worked. As inflation cooled, the Fed began backing off interest rates.
Stock Market Returns: Recession vs. No Recession Scenarios
Which way the stock market goes in 2026, depends greatly on whether we enter a recession or not. This chart shows it.
When the Fed cuts rates at or near record highs, the stock returns over the next year average 13%. If there is no recession, that return increases to 18.2%. If we do have a recession, it’s negative 2.7%.
Key Takeaway: Bull Markets Don’t Die of Old Age
Time will tell, but, the key takeaway is that bull markets don’t die of old age. It will take a negative event or environment to stop our run.
Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.
