Three Straight Years of Double-Digit Stock Gains
At first glance, the story sounds reassuring.
The S&P 500 rose roughly 16% in 2025, marking its third consecutive year of double-digit gains—something that has happened only a handful of times since the 1940s.
After three exceptional years, stock market risk is quietly rising beneath the surface.”
Markets survived tariff scares, volatility spikes, and endless predictions of collapse. Artificial intelligence powered a narrow group of mega-cap winners. Patience, once again, appeared to pay.
So why does this setup feel… unsettling?
Because historically, this is not how risk disappears. It’s how it concentrates.
Extreme Outcomes Are Rare—And That’s Exactly the Problem
Three straight years of double-digit gains are rare for a reason.
Markets don’t compound smoothly forever. Long stretches of strong returns usually reflect:
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Multiple expansion
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Narrative dominance
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Capital concentration
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Optimism outrunning fundamentals
Those forces don’t break immediately. They build fragility quietly.
The danger isn’t that markets go up.
The danger is how they went up—and what had to be ignored along the way.
The Rally Was Narrow, Not Broad
One uncomfortable truth: the market’s strength was highly concentrated.
A small number of stocks accounted for an outsized share of returns. In 2025, NVIDIA alone contributed an estimated ~15% of the S&P 500’s total gain.
That’s not diversification. That’s dependence.
Historically, markets dominated by a handful of names tend to:
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Look resilient right up until they aren’t
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Mask underlying weakness in breadth
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Become vulnerable to any shock that hits the leaders
When leadership narrows, risk doesn’t vanish—it piles up.
Nominal Gains Are Hiding Real Losses
In dollar terms, equity investors did well in 2025.
But in real purchasing-power terms, the picture is murkier.
Gold and silver dramatically outperformed equities, meaning:
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Portfolios grew in dollars
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But lost ground relative to hard assets
That’s a classic late-cycle signal.
When financial assets rise but stores of value rise faster, it suggests confidence in money itself—not just growth—is eroding.
That’s not a crash signal.
It’s a trust signal—and it shouldn’t be ignored.
Volatility Was Not a Bug—It Was a Warning
The 2025 rally wasn’t smooth.
Markets came within a hair of a bear market during the spring tariff shock, falling nearly 20% before recovering. That kind of swing inside a “great year” matters.
It tells us:
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Positioning was fragile
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Liquidity mattered more than conviction
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Sentiment flipped fast
Healthy bull markets don’t typically flirt with disaster and recover purely on narrative momentum.
They don’t need to.
Valuations Have Detached From the Margin for Error
Another uncomfortable reality: future returns are now being pulled forward.
After three strong years:
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Valuation multiples are elevated
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Expectations are optimistic
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Risk premiums are thin
That doesn’t mean markets must fall.
It means there’s less room for disappointment.
When outcomes are priced for perfection, even “okay” results can hurt.
The Psychological Trap Is the Most Dangerous Part
Perhaps the most frightening element isn’t valuation or concentration.
It’s behavior.
After years like this, investors tend to internalize dangerous lessons:
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“Volatility always resolves upward”
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“Dips are always buying opportunities”
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“Macro risks don’t matter”
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“Patience means never reassessing risk”
That mindset doesn’t fail immediately.
It fails when conditions subtly change and the playbook no longer works.
History Doesn’t Repeat—But It Rhymes Uncomfortably Well
Periods following rare streaks of strong gains often share a pattern:
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Returns become choppier
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Leadership fractures
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Fundamentals start to matter again
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Risk management regains importance
Sometimes markets grind sideways for years.
Sometimes they correct sharply.
Often they do both.
What they rarely do is continue compounding at the same pace without interruption.
Why This Matters Heading Into 2026
None of this guarantees a crash.
That’s not the point.
The point is that the distribution of outcomes widens after periods like this:
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Upside still exists, but it’s harder won
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Downside becomes faster and more correlated
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Narrative-driven markets lose forgiveness
In other words, the market becomes less tolerant of mistakes.
The Bottom Line
Three straight years of double-digit gains feel comforting.
Historically, they shouldn’t.
They signal:
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Concentration risk
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Valuation risk
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Behavioral complacency
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A shrinking margin for error
The most dangerous markets aren’t the ones full of fear.
They’re the ones where confidence quietly outruns caution.
Heading into 2026, that’s the risk worth watching most closely.
Sponsor Note
MacroHint is proudly supported by Lake Region State College, a public college serving North Dakota and the surrounding region with programs focused on workforce development, applied learning, and academic excellence.
Sponsorship support helps make independent, long-form economic analysis possible. Lake Region State College has no influence over the content, viewpoints, or conclusions expressed in this article.
Disclaimer
This article is for informational and educational purposes only and reflects the author’s opinions at the time of writing. It does not constitute investment advice, a recommendation to buy or sell any security, or a solicitation of any kind. Readers should conduct their own research and consult qualified financial professionals before making investment decisions.