Over the last 50 years, the S&P 500 (VOO 1.53%) has increased about 10% annually on average. Barring a catastrophe in the final weeks of this year, the S&P 500 will have an above-average year in 2025, considering the year-to-date gain is 17%. In fact, 2025 is on pace to be the third consecutive year of significantly above-average returns.
After three years of above-average returns, many investors feel that the stock market is barreling full speed toward a cliff. The temptation is to sell stocks now and start buying again after the market crashes. But is a crash truly just around the corner? Is there a historical pattern that investors can use to inform their investment decisions right now?
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I believe there is a historical trend worth watching. In fact, it may be the only pattern worth paying attention to.
The historical pattern and why it matters
On average, the stock market goes up two out of three years. This means it's always a good idea to bet on the market going up. The historical pattern suggests a high probability that stocks will experience another strong year in 2026.
That may sound like a cheap, simplistic answer, but hear me out. Let's say that there was a lottery out there where you could win the jackpot two times for every three times that you played. Would you play all three times, or would you sit one out, trying to guess the one time that you would lose?
Here's a nuanced answer to the question: It depends on the size of the jackpots and the cost to play. Assuming the value of the two jackpots is greater than the cost to play three times, you'd play this lottery every time because you'd come out ahead in the long run, even after losing one time out of three.
Let's think about this in terms of investing in the stock market. The worst time is during a bear market, which is defined as a drop of 20% or more. But according to Vanguard, the average bear market lasts only 15 months. These only happen a couple of times per decade on average. More common are drops of 10% to 20%, but those only last for about three to four months on average.
In other words, the stock market "jackpots" are consistently bigger than the cost to "play."
Therefore, for investors looking to make a data-driven decision, it seems best to continue buying and holding stocks in a portfolio, year in and year out. The S&P 500 is statistically likely to increase in value in 2026. And even if a market crash does occur, it will likely be short lived, shifting to a new bull market soon after.
Another pattern that's too good to ignore
Tesla, Devon Energy, Occidental Petroleum, Nvidia, and Palantir Technologies were the top-performing stocks in 2020, 2021, 2022, 2023, and 2024, respectively. If you bought shares of these stocks immediately after they took the annual crown, you outperformed the S&P 500 during the following year 80% of the time -- only Occidental Petroleum underperformed in 2023.
In short, the odds are that the market will rise in 2026, and Sandisk (SNDK 5.69%) could be an above-average performer because it's the top performer in 2025 so far. In February, the computer memory company was spun out from Western Digital. And it was included in the S&P 500 in November. Year to date, it's up more than 500%.
NASDAQ: SNDK
Key Data Points
The historical pattern suggests it will outperform the S&P 500 again in 2026.
It may seem outrageous to buy a stock that's already up more than 500%. And it's true, the historical pattern doesn't guarantee future results. But the top-performing stock usually keeps climbing for at least another year for good reason: Over the long term, stocks increase because of positive business trends. And business trends tend to continue for multiple years.
For Sandisk, the tailwinds are just starting to really pick up. The company completed its fiscal 2025 in June. Revenue for the year was only up by 10%. But 2026 is already shaping up much better. Fiscal first-quarter revenue surged 23% year over year. And for fiscal Q2, management expects greater-than 40% growth.
Sandisk's memory products are increasingly important to data centers. The company is filling orders to some of the largest hyperscalers in the world, boosting revenue and pointing to better profit margins as demand outpaces supply.
If the current data-center trend continues with hyperscalers for another year or more, investors can expect the favorable operating environment to continue for Sandisk. This is why it's important not to dismiss this year's winner simply because it's already up so much.
Regardless of one's view on Sandisk stock today, the takeaway remains the same: It's important to stay invested. The stock market usually trends higher, and eventual downturns aren't consequential enough for long-term investors to timidly sit on the sidelines.
