The Stock Market Sounds an Alarm for the First Time in 25 Years. Here's What History Says the S&P 500 Will Do in 2026

Group 1 - The long-run average return of the S&P 500 is approximately 7% after accounting for inflation and dividend reinvestment, but since 2023, it has generated an average return of 21% per year, tripling its long-term average [1][2] - The CAPE ratio currently stands at 39.8, a level last seen in 2000 before the dot-com crash, indicating potential overvaluation in the stock market [4] - Historical trends show that the CAPE ratio has reached such high levels only twice before, in the 1920s and during the dot-com era, both leading to significant market corrections [5] Group 2 - A rising CAPE ratio reflects broader market optimism but can lead to lower returns as premium prices become fragile, suggesting caution for investors [6] - The S&P 500's total market capitalization is $58 trillion, with the top 10 most valuable companies accounting for approximately 44% of the index, valued at around $26 trillion [8]