Is the Stock Market Going to Crash in 2026? Here Is What History Suggests

• The S&P 500 is presently hovering adjacent all-time highs, which whitethorn person immoderate investors concerned.

• The index's guardant price-to-earnings and CAPE ratios are historically elevated compared to anterior norms.

• Smart investors are stockpiling currency and rotating superior distant from speculative oregon momentum stocks close now.

• 10 stocks we similar amended than S&P 500 Index ›

Last year, the S&P 500 (SNPINDEX: ^GSPC) gained 16% -- marking the 3rd consecutive twelvemonth the scale generated double-digit returns. While stocks person gotten disconnected to a blistery commencement to statesman 2026, 2 important indicators suggest that a pullback could beryllium connected the horizon. Let's excavation into these important metrics to recognize conscionable however frothy the marketplace has become. From there, we'll find wherever mightiness beryllium the champion spot to put arsenic stocks proceed to roar, for now.

According to FactSet Research, the S&P 500 presently boasts a guardant price-to-earnings (P/E) aggregate of 22. Not lone is this elevated compared to the index's five-year and 10-year guardant P/E levels, it is historically precocious successful general.

In caller history, the lone different periods erstwhile the S&P 500 was trading astatine specified a premium comparative to guardant net estimates were during the dot-com bubble, and during the banal marketplace frenzy during the COVID-19 pandemic's tallness (which was supported by abnormal levels of liquidity fixed the low-interest-rate environment).

When guardant valuation multiples statesman to emergence sharply, it could beryllium an denotation that expectations are outpacing existent net growth. In different words, investors are pricing the marketplace to perfection -- a script featuring beardown gross growth, widening nett margins, and a dependable macroeconomic representation crossed the board.

This is important to recognize due to the fact that adjacent a bully net study whitethorn extremity up disappointing investors if sentiment is not aligned with reality. Under these conditions, a sell-off could occur, arsenic valuation, not concern performance, was the culprit.

Another important metric to digest is the S&P 500 Shiller CAPE ratio. This measurement accounts for firm net implicit a 10-year play -- adjusted for ostentation -- successful operation with the existent level of the banal market. Essentially, the Shiller CAPE is simply a utile mechanics successful gauging however costly the marketplace is comparative to a normalized long-run net picture.

Right now, the CAPE ratio is hovering astir a level of 39 -- its highest constituent since the dot-com bubble burst successful aboriginal 2000. Taking a longer-term presumption into perspective, investors tin spot that during times of highest CAPE ratios, little banal returns often followed. This is particularly wide successful the precocious 1920s and aboriginal 2000s.