Will the Stock Market Crash in 2026? What History Says.

Market Valuation Indicators - The Shiller P/E (CAPE) ratio is currently around 40, significantly above its long-term average of 17, indicating potential overvaluation as historical data shows a 20% or more decline when the ratio exceeds 30 for extended periods [3] - The Buffett Indicator, which measures total U.S. stock market capitalization against GDP, is near 225%, suggesting significant overvaluation, as any ratio above 160% is considered overvalued [4] Midterm Elections Impact - The upcoming midterm elections in 2026, with a third of Senate seats and all House positions contested, historically lead to increased market volatility, with an average annual return of only 0.3% for the S&P 500 in the year leading up to elections since 1950 [5] - Post-midterm elections, the S&P 500 has historically rallied, with no negative returns following elections since 1939 and an average 12-month return of 16.3% after elections since 1950 [6] Bull Market Longevity - The current bull market has recently celebrated its three-year anniversary, which is typically a positive sign, as bull markets have averaged five and a half years since 1950, with historical data indicating that bull markets lasting three years often extend to at least five years [7] - Despite indicators suggesting overvaluation, historical trends show strong performance for stocks after midterm elections and the potential for prolonged bull markets [8]