Is a Stock Market Crash Coming in 2026? Here's What the Numbers Tell Us

The bull market has now powered through its fourth year, and investors are increasingly nervous. With the next stock market crash seeming like an ever-present threat, let’s break down what historical patterns and valuation metrics actually suggest about 2026.

Two Valuation Red Flags That Keep Investors Up at Night

The Buffett Indicator is flashing yellow. Warren Buffett’s preferred gauge—dividing total U.S. stock market capitalization by GDP—now sits near 225%, well above the 160% threshold that screams “overvalued.” The last time this metric approached 200% was in 2000, right before the tech wreck. No wonder Buffett himself has been hoarding cash.

The CAPE Ratio is even more alarming. Created by Nobel Prize winner Robert Shiller, this metric smooths out cyclical business earnings by taking the S&P 500’s current price and dividing it by inflation-adjusted earnings from the past decade. Its historical average hovers around 17. Today? It’s sitting near 40—a level we’ve only seen once before, during the dot-com bubble. Whenever this ratio has stayed above 30 for extended periods, markets have inevitably crashed 20% or more.

So should investors panic? Not so fast.

Why Historical Patterns Suggest Caution, But Not Catastrophe

Mid-term elections typically bring volatility, not devastation. 2026 is a mid-term election year, which historically creates market uncertainty. In the 12 months leading up to mid-terms since 1950, the S&P 500 has averaged just 0.3% annual returns, often experiencing painful pullbacks from peak to trough.

But here’s the twist: once the elections pass, the market tends to bounce back hard. Since 1950, the S&P 500 has posted positive returns in the 12 months following every single mid-term election. The average? A healthy 16.3% gain.

Bull markets are surprisingly resilient. With three years under its belt, this bull market is entering territory where history suggests extended strength. Since 1950, the average bull market has lasted five and a half years. More importantly, Carson Group’s research shows that every single bull market lasting three years has gone on to last at least five years over the past 50 years.

Looking at specific benchmarks: in the five instances since 1950 when the S&P 500 jumped more than 35% in a six-month window—which happened earlier this year—stocks were higher 12 months later in every case, with an average return of 13.4%.

The AI Question: Cyclical or Secular?

This is where the next stock market crash narrative gets complicated. Tech mega-caps driving the rally don’t look expensive on forward price-to-earnings ratios. Nvidia trades at just 25x forward earnings. Alphabet, Amazon, and Microsoft all sit below 30x while growing revenue aggressively.

The real fork in the road: are AI and data center infrastructure investments cyclical (temporary semiconductor cycles) or secular (decade-long structural shifts)?

If it’s cyclical, valuations matter—and stocks like Nvidia look stretched. If it’s secular, these companies are bargains, and traditional valuation metrics are dinosaurs.

This question likely won’t be settled in 2026.

The Bottom Line: Prepare for Chop, Not Crash

Combining all the signals: yes, valuations are stretched by historical standards. Yes, mid-term elections create uncertainty. But bull markets historically extend for five-plus years, post-election rallies are nearly guaranteed, and the AI infrastructure build-out could represent genuine long-term growth.

My base case? Expect a moderate pullback in the first half of 2026, but not the next stock market crash doomsayers fear. Then watch for a typical post-election rally and a positive year overall.

The real strategy isn’t timing the next stock market crash—it’s staying consistent. Dollar-cost averaging into broad-based ETFs like index funds removes the guesswork entirely.