Is the US stock market going to crash this year?
To be honest, I don’t know, and nobody really does. But I can lay out a few key indicators for you to judge yourself.
Let’s start with the bullish side.
Q1 earnings season just wrapped up, and the overall earnings growth for the S&P 500 constituents is 28.6%, the best quarter in the past three years.
Apple's Greater China revenue up by 28%, Microsoft’s AI business is doubling annualized, Palantir's revenue up by 85%.
The Fed hasn’t cut rates yet, but inflation has dropped from 9% to the 3% range. The market expects at least one rate cut in the second half. Once the rate cut cycle starts, it's a direct win for the stock market.
AI is a variable we haven’t seen in past cycles. This isn't like the 2000 bubble where “internet companies had no revenue but were valued in the billions.”
NVIDIA made over $40 billion in a single quarter, and Microsoft’s AI business is on track for $37 billion annualized. AI commercialization is already generating real cash flow.
Now, let’s talk about the risks.
The S&P currently has a price-to-earnings ratio of about 22x, which isn’t cheap. Some AI stocks in the Nasdaq are already at 50-100x PE. If earnings growth slows down, these valuations could get compressed quickly.
Geopolitical factors are the biggest uncertainty. Tariffs, Taiwan Strait tensions, the Middle East—any black swan event could trigger a short-term nosedive.
Plus, market congestion is increasing. For example, last week the storage chip sector dropped 3%-6% in a single day, and the Philadelphia Semiconductor Index fell 3% in one day, indicating that certain sectors are getting crowded and even a slight shake could cause a sell-off.
So, what’s my conclusion?
What’s the probability of a 10%-15% correction in the US stock market by 2026? Quite high, you could almost say it’s a certainty. Over the past 46 years, the S&P 500 has experienced an average maximum drawdown of 14% each year. Every year. A correction isn’t a surprise, it’s the norm.
What’s the probability of a crash of 20% or more in the US stock market by 2026? Not zero, but not high either. Historically, a crash usually requires two conditions to be met simultaneously: worsening earnings + tightening liquidity.
Right now, earnings are accelerating, and while liquidity hasn’t loosened, it hasn’t tightened further either—so both conditions aren’t met.
The real question isn’t here. The real question is: what are you waiting for?
To be honest, I don’t know, and nobody really does. But I can lay out a few key indicators for you to judge yourself.
Let’s start with the bullish side.
Q1 earnings season just wrapped up, and the overall earnings growth for the S&P 500 constituents is 28.6%, the best quarter in the past three years.
Apple's Greater China revenue up by 28%, Microsoft’s AI business is doubling annualized, Palantir's revenue up by 85%.
The Fed hasn’t cut rates yet, but inflation has dropped from 9% to the 3% range. The market expects at least one rate cut in the second half. Once the rate cut cycle starts, it's a direct win for the stock market.
AI is a variable we haven’t seen in past cycles. This isn't like the 2000 bubble where “internet companies had no revenue but were valued in the billions.”
NVIDIA made over $40 billion in a single quarter, and Microsoft’s AI business is on track for $37 billion annualized. AI commercialization is already generating real cash flow.
Now, let’s talk about the risks.
The S&P currently has a price-to-earnings ratio of about 22x, which isn’t cheap. Some AI stocks in the Nasdaq are already at 50-100x PE. If earnings growth slows down, these valuations could get compressed quickly.
Geopolitical factors are the biggest uncertainty. Tariffs, Taiwan Strait tensions, the Middle East—any black swan event could trigger a short-term nosedive.
Plus, market congestion is increasing. For example, last week the storage chip sector dropped 3%-6% in a single day, and the Philadelphia Semiconductor Index fell 3% in one day, indicating that certain sectors are getting crowded and even a slight shake could cause a sell-off.
So, what’s my conclusion?
What’s the probability of a 10%-15% correction in the US stock market by 2026? Quite high, you could almost say it’s a certainty. Over the past 46 years, the S&P 500 has experienced an average maximum drawdown of 14% each year. Every year. A correction isn’t a surprise, it’s the norm.
What’s the probability of a crash of 20% or more in the US stock market by 2026? Not zero, but not high either. Historically, a crash usually requires two conditions to be met simultaneously: worsening earnings + tightening liquidity.
Right now, earnings are accelerating, and while liquidity hasn’t loosened, it hasn’t tightened further either—so both conditions aren’t met.
The real question isn’t here. The real question is: what are you waiting for?