will the stock market go down in 2026?

Will the stock market go down?

This article addresses the investor question: "will the stock market go down"? Readers will gain a clear, evidence-based view of what “going down” means (corrections, bear markets, crashes), the indicators professionals watch, scenario-based forecasts for 2026, historical lessons, likely triggers, how declines typically progress across assets (including crypto), and practical risk-management steps for different investor horizons. Expect neutral, conditional language — forecasts are inherently uncertain and used best for planning, not timing.

Background and recent market context

Investor concern about whether "will the stock market go down" is elevated because the U.S. equity market emerged from deep 2022 lows into a multi-year rally led by mega-cap and AI-focused names. Valuations for a narrow group of stocks have stretched, while market leadership concentrated in technology and AI-related companies.

As of Dec 2025, major observations from market coverage included large corporate cash hoards and strategic positioning. For example, reports in mid-December 2025 noted Berkshire Hathaway accumulating unusually high cash balances (approaching roughly $400 billion), a signal some market observers interpret as caution from a long-time investor. Separately, corporate crypto treasury activity continued: as of Dec 29, 2025, a corporate treasury press release showed a large institutional buyer controlling several million ETH and increasing staking activity — a reminder that institutional flows into crypto can interact with equities in risk-off episodes.

Valuation measures such as trailing and forward P/E ratios, the cyclically adjusted price-to-earnings ratio (CAPE), and the Buffett Indicator (market cap/GDP) were cited frequently in year-end 2025 outlooks as reasons why investors are asking, "will the stock market go down?" Policy expectations (Fed path for rates), macro growth forecasts, and concentrated market leadership make the question timely.

What “going down” means — corrections, bear markets, crashes

When investors ask "will the stock market go down", they often mean different magnitudes and timeframes. Definitions commonly used:

• Correction: a decline of about 10% from a recent high. Corrections occur frequently and are often short-lived.
• Bear market: a decline of 20% or more from peak. Bear markets are less frequent and can last months to years.
• Crash: a very sharp, often single-day or multi-day decline (e.g., >10% in days), usually driven by panic, structural stress, or sudden shocks.

Historical magnitudes vary. Corrections are common within bull markets; bear markets have occurred several times over decades and are typically associated with economic recessions, severe policy shifts, or financial crises. Recovery durations also vary: some bear markets recover within one to two years, others take longer.

Key indicators and metrics investors watch

Many indicators help frame the odds and possible severity of a decline. No single metric predicts timing with precision; professionals combine signals to form conditional scenarios.

Valuation metrics

• CAPE (Shiller P/E): smooths earnings over cycles to gauge long-term valuation. Elevated CAPE readings historically correlate with lower subsequent long-term returns, though timing remains uncertain.
• Trailing and forward P/E: high forward P/Es can indicate optimism; compression can accelerate falls when earnings expectations are reset.
• Buffett Indicator (total market cap / GDP): when above long-term norms, it signals stretched aggregate valuations.
• Equity risk premium: the spread investors demand over safe assets (e.g., Treasuries). A low implied equity risk premium suggests investors expect strong returns, leaving less buffer for downside.

Each metric is imperfect. High valuations increase vulnerability to negative surprises but do not prove an imminent decline.

Macro and economic indicators

• Unemployment and payrolls: rising unemployment historically increases recession odds and equity downside.
• GDP growth and industrial/activity data: decelerating growth raises recession risk scenarios.
• Inflation and real incomes: persistent inflation can force tighter policy, pressuring multiples.
• Recession probability models: some firms publish conditional scenarios (for instance, Wall Street strategists have issued forecasts where a recession significantly increases the chance of a 15–25% market decline). Such forecasts are conditional — often phrased as "if recession occurs, then..." — and thus emphasize uncertainty.

Market internals and sentiment

• Breadth: the number of advancing vs. declining stocks. Narrow breadth (index gains driven by a few names) increases fragility.
• Volatility (VIX): spikes signal rising fear; elevated realized volatility often accompanies corrections.
• Credit spreads: widening spreads (corporate yield over Treasuries) indicate rising financial stress, which can presage equity weakness.
• Survey sentiment: investor sentiment surveys (professionals and retail) can act as contrarian indicators when extremely bullish or bearish.

Monetary and fiscal policy signals

• Fed policy: rate hikes and the pace of tightening can reduce present value of expected earnings. Conversely, credible, well-timed cuts can support markets.
• Yield curve: sustained inversion historically correlates with higher recession risk.
• Fiscal policy and large-scale spending or tariffs: material policy changes can alter corporate earnings expectations and investor risk appetite.

Expert forecasts and scenario analysis

Professional outlooks at year-end 2025 presented a range of views. Common framing included:

• Base case: muted returns and continued volatility, with modest upside if growth remains intact and inflation moderates.
• Recession/worse case: several forecasters (including conditional outlooks published by some banks) outlined scenarios where a recession could trigger swift, double-digit declines — in some conditional models, a 20%-plus drop in the S&P 500 if a meaningful recession occurs.
• Tail risks: sudden policy mistakes, geopolitical shocks, or financial-sector stress could produce deeper or faster market falls.

Notable provider perspectives (late 2025): Vanguard and Fidelity published 2026 outlooks that highlighted a range of outcomes and elevated risk; Morningstar identified selective opportunities while warning of valuation pressures; survey compilations (CNBC strategist surveys and roundtable discussions) showed no consensus on timing, only a broad acknowledgement of higher uncertainty. The Motley Fool and other retail-oriented outlets provided practical investor actions conditional on market stress, such as portfolio reviews, cash buffers, and quality tilts.

All professional forecasts are conditional and probabilistic. They are designed to inform allocation and contingency planning rather than precise market timing.

Historical precedents and what history suggests

Pullbacks and corrections are normal: declines of 5–10% happen regularly in long-term bull markets. Bear markets (≥20% declines) have historically coincided with recessions, major credit events, or asset bubbles bursting.

Lessons from history:

• Timing is difficult: many calls for imminent crashes were premature; bull markets can continue well beyond skeptics’ expectations.
• Diversification works: portfolios diversified across sectors and asset classes have historically fared better through market stress.
• Recoveries vary: some indices rebound quickly after policy action or earnings recovery; others take years to regain previous peaks.

Anecdotal signals (e.g., large cash positions at long-term investors) have preceded periods of weaker returns, but they are not guarantees. For instance, a well-known investment conglomerate increase in cash in late 2025 was reported by major press outlets, and some observers interpreted that as a warning; others noted that a cash build does not force a market downturn.

Common triggers for a market decline

When investors ask "will the stock market go down", they often want to know what could trigger it. Common triggers include:

• Recession or weakening labor market: a sustained slowdown in employment and consumer spending undermines corporate earnings.
• Inflation or policy surprise: higher-than-expected inflation can force the central bank to tighten further.
• Rapid Fed tightening or mis-timed easing: unexpected rate moves can reshape discount rates and risk-free yields.
• Asset bubbles and concentrated bets: speculative excesses (e.g., narrow AI/tech leadership) can reverse quickly.
• Geopolitical shocks: major events can tighten risk premiums (note: political and war analysis is outside this guide’s scope).
• Credit/financial stress: bank runs, liquidity squeezes, or large corporate defaults can spark broader market contagion.
• Adverse fiscal changes or trade disruptions: policy measures that materially harm growth expectations.

Triggers are often interrelated: a shock in one area (credit, inflation, geopolitics) can cascade into others.

How declines typically progress and which assets get hit first

Declines often begin in the most speculative, highly valued, or most leveraged pockets of the market. Typical sequence:

1. Risk-off begins in small-cap, momentum, and highly leveraged positions.
2. Market breadth deteriorates; leadership narrows further.
3. Volatility spikes and credit conditions tighten.
4. Rotation into defensives and higher-quality names occurs, but sometimes defensive sectors also sell off in severe risk-on to risk-off reversals.

During many corrections, growth and high-P/E names tend to fall more than value-oriented or high-quality dividend payers. That said, the pattern can reverse depending on the nature of the shock (e.g., inflation-led shock may hurt interest-rate sensitive growth stocks while boosting commodity-linked sectors).

Relationship with other asset classes

When asking "will the stock market go down", consider how other assets typically behave during equity drawdowns:

• Bonds: in many risk-off episodes, investors buy high-quality government bonds (flight to quality), which can push yields down. However, if the decline is driven by inflation or policy surprises, both stocks and bonds can sell off together.
• Cash: cash or short-term Treasuries are a traditional safe haven; higher cash allocations reduce portfolio volatility but may miss rebounds.
• Commodities: performance is mixed; energy and certain commodities may rally if declines stem from inflation worries, but demand-driven slowdowns can depress commodity prices.
• Crypto and speculative assets: historically more volatile than equities and often fall earlier and deeper in risk-off moves. For crypto holders, using a regulated exchange and secure wallet matters — Bitget Wallet and Bitget exchange are noted options for custodial/trading activity and for managing on/off ramps in volatile markets.

Risk management and investor actions

When the central question is "will the stock market go down", practical steps differ by investment horizon and objectives. Below are frameworks often recommended by professional advisers and market commentators; these are informational, not investment advice.

Long-term investors

• Stick to your plan: long-term investors typically maintain asset allocation aligned with time horizon and risk tolerance.
• Diversification: across sectors, styles (growth/value), geographies, and asset classes.
• Rebalancing: systematic rebalancing helps buy low and sell high over time.
• Dollar-cost averaging (DCA): invest consistently rather than attempting to time entry points.
• Emergency reserves: maintain liquid cash for near-term needs so long-term positions aren't forced into selling during drawdowns.

These principles are widely advocated by Fidelity, Vanguard, and Morningstar for investors with multi-year horizons.

Defensive measures and tactical tools

• Higher-quality bonds and shorter-duration fixed income: can reduce portfolio volatility.
• Cash buffers: maintain cash to deploy into opportunities or to cover needs.
• Hedging (options, inverse products): available for experienced investors but complex and costly if used incorrectly.
• Stop-losses: can limit losses but risk being triggered by normal volatility; they require clear rules and discipline.
• Tax-loss harvesting: can be a useful post-drawdown tactic to capture tax efficiencies.
• Shifting to higher-quality/value exposures: some advisors suggest temporarily re-weighting toward defensive sectors during high-risk periods.

Motley Fool-style practical moves highlighted in late-2025 commentary included reviewing allocations, increasing emergency savings, considering high-quality bonds, and avoiding panic selling — steps aligned with major advisory houses’ guidance.

Practical steps suggested by advisors

• Review allocation and risk tolerance, not headlines.
• Ensure liquidity for short-term needs (3–12 months of expenses depending on situation).
• Maintain written rules for rebalancing and loss-limiting to avoid emotional trading.
• For crypto holders: consolidate custody and consider secure wallets (e.g., Bitget Wallet for on-chain management) and review exchange counterparty risk when trading crypto during volatile equity drawdowns.

Probabilities, uncertainty, and how to use forecasts

Precise timing of market declines is unpredictable. Forecasts are conditional and provide scenarios for planning rather than exact predictions. Use probabilistic thinking:

• Translate scenarios into portfolio actions: e.g., if recession probability rises from X% to Y%, consider rebalancing triggers tied to those thresholds rather than reacting to headlines.
• Calibrate to personal risk tolerance: younger investors with long horizons may accept drawdowns; near-retirees often prefer more conservative mixes.
• Avoid binary thinking: plan for multiple outcomes (base case, recession case, tail risks) and maintain contingency plans.

Professional probability ranges vary across strategists and change with new data. The key is to use forecasts to update plans, not to trade on absolute certainty.

Frequently asked questions (FAQ)

Q: Can anyone predict a crash?
A: No credible forecaster can predict exact timing of crashes consistently. Forecasts are probabilistic and conditional; use them to plan, not time the market.

Q: Should I sell now?
A: Decisions depend on your time horizon, risk tolerance, and liquidity needs. Panic selling can lock in losses. Consider a rules-based approach (rebalancing, target allocation adjustments) rather than emotion-driven sales.

Q: How bad could a downturn be?
A: Historically, bear markets have ranged from ~20% to over 50% in extreme cases. Conditional scenarios from some forecasters published in late 2025 indicated about a 20%+ S&P drop if a significant recession occurs; tail events can be worse but are less likely.

Q: How should long-term savers respond?
A: Maintain diversified allocations aligned to goals, preserve liquidity for near-term needs, and use market dips to add systematically if capacity allows.

Implications for crypto and highly speculative assets

Crypto and other speculative assets typically show higher sensitivity to risk-off episodes. In past drawdowns they have often fallen earlier and steeper than equities. Institutional flows, such as large corporate treasury buys or staking programs, can reduce available free float but do not eliminate downside in broad risk-off moves.

For crypto participants, manage counterparty and custody risk: consider secure wallets and regulated exchanges; where appropriate, Bitget Wallet is an option for on-chain asset management and Bitget exchange offers trading and liquidity features — always balance convenience with security and store long-term holdings in secure wallets.

Further reading and data sources

For ongoing monitoring and deeper analysis, follow regular releases from the institutions and publications that publish strategy surveys and outlooks: Morningstar, Vanguard, Fidelity, CNBC surveys, Motley Fool commentary, and major-bank strategist notes. Track real-time indicators: VIX, credit spreads, yield curve, ISM/manufacturing data, payrolls, and on-chain crypto metrics for cross-asset context.

References

• The Motley Fool — "Will the Stock Market Crash in 2026? What History Says."
• Business Insider — "Brace for a swift 20% drop in the S&P 500 if recession strikes in 2026 (Stifel)."
• The Motley Fool — "Is a Stock Market Crash Coming? 3 Simple Moves to Make Right Now to Protect Your Investments."
• Morningstar — "December 2025 Stock Market Outlook."
• CNBC — "Wall Street's official 2026 stock market outlook: Market Strategist Survey."
• Star Tribune — "Expect a turbulent stock market in 2026 as K-shaped economy takes hold."
• Fidelity — "2026 stock market outlook."
• Vanguard (VEMO) — "2026 outlook: Economic upside, stock market downside."
• A Wealth of Common Sense — "A 30% Decline in the Stock Market."
• U.S. Bank — "Is a Market Correction Coming?"

Additional contemporaneous data cited in the article:

• As of Dec 29, 2025, a corporate crypto treasury press release reported a large institutional buyer controlling roughly 4.1 million ETH and continuing staking deployments (press release; corporate filing).
• As of mid-December 2025, press reports indicated Berkshire Hathaway holding close to $400 billion in short-term U.S. Treasuries and cash equivalents.

(Reporting dates shown above for time-sensitive items reflect the late-2025 context used in this article.)

Practical next steps and where Bitget fits in

If you are asking "will the stock market go down" and want to prepare:

• Review your allocation and liquidity needs.
• Use rules-based rebalancing and avoid headline-driven market timing.
• If you hold crypto, consider custody and wallet security: Bitget Wallet and the Bitget exchange are options to manage trading and on-chain activity securely.

Explore Bitget features and the Bitget Wallet to manage exchanges and custody needs while maintaining a diversified plan across asset classes.

Further explore the data sources listed above and set personal allocation rules tied to your goals and risk tolerance — forecasts inform planning but do not guarantee outcomes.

Thank you for reading. For more market outlook content and tools to manage cross-asset risk, explore Bitget’s educational resources and Bitget Wallet for crypto custody.