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Is a Stock Market Crash Coming in 2026? Here's What Decades of History Suggest.
The Motley Fool • • business
Key Points:
- The S&P 500 has gained 10.8% this year but has recently declined, risking the end of its streak of four consecutive years of double-digit gains.
- The market's high valuation, measured by the CAPE ratio surpassing 40 earlier this year, is historically a warning sign of a potential crash, similar to patterns seen before the 2000 dot-com crash.
- Current market conditions echo the dot-com bubble with heavy AI spending by major tech companies like Amazon and Alphabet, although these firms are more established but currently free-cash-flow negative.
- High inflation and steady interest rates pose economic challenges, reminiscent of past crises like the 1973 oil embargo, which led to severe market downturns, but today's conditions are less extreme.
- Despite risks, historical lessons suggest any potential crash may be less severe, and well-prepared investors can expect their portfolios to recover over time.
