Heading into 2026, it looks as though the S&P 500 ( ^GSPC 1.07% ) will be coming off a third consecutive year of outperforming its long-run average of 10%. As of Monday's close, the index was up over 16% thus far in 2025, which is actually lower than the previous two years when it rose by more than 23%.

Investors have remained bullish on the stock market despite concerns of rising valuations and a potential bubble due to artificial intelligence (AI). Some, however, are worried that the market may be overdue for a steep correction, possibly even a crash given how expensive many stocks are.

I wouldn't be surprised to see another year of slowing returns for the market in 2026, but just how good or bad things will be will likely depend on one key decision.

A change in the Fed

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