The S&P500 is the most popular stock index worldwide. Representing the 500 largest companies in the world’s largest economy, tracker funds following the leading US benchmark are core investments in the portfolios of many British investors.

The S&P 500 has achieved positive returns in eight of the last 10 years. Last year was another success, despite President Trump’s tariffs and global conflicts. But is the US stock market likely to crash in 2026? Here’s my opinion.

Warning signs

Every year, dozens of analysts and commentators predict an imminent stock market crash. Likewise, many counter the doomsayers with bullish predictions of glorious profits. The truth is that no one knows for sure what will happen.

However, we can compare where we are today with previous periods in history and draw conclusions from that. Worryingly, as we enter the modern year, there are some warning signs for S&P 500 stocks.

One of them is Shiller’s price-to-earnings (P/E) ratio. This valuation metric divides the current price of the S&P 500 by the average of its inflation-adjusted earnings over the past 10 years.

Currently it is 40.74. For comparison, this is the second highest level in history, surpassed only by the dot-com bubble. Many people fear that an artificial intelligence (AI) bubble is growing in today’s stock market. When the bubbles burst, the subsequent disaster can be devastating.

Investment expenditures on artificial intelligence by S&P 500 companies amounted to approximately USD 400 billion in 2025. This year’s estimates are over $500 billion. If sentiment changes, 2026 could prove to be a very painful year for investors in US stocks.

Reasons for optimism

It’s tempting to make comparisons to the tardy 1990s, but there are fundamental differences between the S&P 500 then and the S&P 500 today. During the dot-com era, many technology companies failed to produce profits and solid cash flows. Rapid increases in stock prices were often the result of speculative frenzy.

Arguably, today’s mega-capitalist tech companies are in much better shape. These are highly profitable companies with solid fundamentals across a range of metrics.

The potential of AI may be driving shares higher, but specific gains may justify the excitement. Those who expect the S&P 500 to crash this year may well find that their fears are unfounded.

The underrated action of Magnificent 7

Total disaster is possible, but I am confident. After all, the great Benjamin Graham said: “To be an investor, you have to believe in a better tomorrow“.

But I am also aware of the revaluation. That’s why I invested recently Metaplatforms (NASDAQ:META), owner of Facebook, Instagram and WhatsApp.

With a forward P/E multiple of 22.2, Meta is the cheapest of the Magnificent 7 club in this regard. I think the company’s stock could shine this year, provided the overall market doesn’t collapse.

Third-quarter earnings were impressive, with revenue up 26% to $51 billion and daily users up 8% to 3.54 billion. Precisely targeted advertising continues to be an ATM for the company, and the moat it has in the world of social media cannot be overstated.

Regulations pose an increasing risk to the company. Australia’s social media ban on under-16s could inspire other countries to follow suit, which could hurt Meta’s share price.

However, I believe Mark Zuckerberg is one of the most talented and competitive CEOs in the S&P 500. At today’s price, Meta could outperform in the long run.