Will Us Market Crash This Year

last updated on

Will Us Market Crash This Year

Will S&P 500 Crash This Year?

The S&P 500 had a great 2025 with AI stocks doing most of the heavy lifting. The index managed to reach new highs despite the geopolitical and economic risks.

But the question that is on everyone's mind now is where the S&P 500 is headed in 2026. A lot of investors are fearful that the markets may crash this year, and these fears are not without substance.

S&P 500 P/E Ratio Is 31

The first major concern is that the P/E ratio of the S&P 500 is 31. Now, that's almost double the average P/E ratio of the index.

Also, the US job market is going through tough times with a visible decline in employment and even in job quality. On top of that, the US tariffs have driven up the costs, which is likely to further push inflation higher.

The overall situation reveals that the stage is set for the US economy to undergo a recession in 2026. Amidst all of these negative points, there are also some positives for the S&P 500 index.

The first positive thing is that the valuations are high, but they are still driven by the steady earnings growth. A classic example of this is Nvidia, which reached new highs but also has earnings growth to back up the stock price.

According to analysts, the S&P 500 index is likely to jump by 14.6%. Similarly, the analysts are also bullish about the index in 2027 with projected growth of 15%.

Meanwhile, the average return in the last decade is around 8.6% which suggests that the current growth rate is close to double now.

This year, the Federal Reserve is expected to go through rate cuts at a really fast pace. On top of that, the US government is expected to provide fresh economic stimulus in the form of tax cuts.

With these measures, the US government could avoid an economic recession in 2026. So, if the US government indeed takes these steps, then the S&P 500 index could avoid the market crash this year.

Trending Stories