Will the Market Crash in 2026? Here's What History Says and What to Do About It
- - Will the Market Crash in 2026? Here's What History Says and What to Do About It
Prosper Junior Bakiny, The Motley FoolFebruary 4, 2026 at 5:35 AM
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Key Points -
There are fears that stocks are overvalued right now, and some data backs this up.
This could lead to a market crash, though we can't be certain.
Buying shares of undervalued companies with strong long-term prospects is a great way to mitigate the risk of a market meltdown.
10 stocks we like better than Pfizer ›
It's impossible to reliably and consistently predict stock market crashes. Anyone who could pull that off would be the richest person on Earth. However, we can make educated guesses based on data and past events.
So, will there be a market crash in 2026? Let's consider one reason to think so, and what investors can do to prepare.
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Are equities overvalued?
Some investors worry that we are currently in an artificial intelligence (AI) bubble. True, the technology is changing industries, and the corporations leading the charge are cashing in. But shares of some AI companies -- with the most prominent few accounting for a significant weight of major indexes -- have risen too much too fast, leading to an overvalued market, or so the argument goes.
Is there any data to suggest that this is the case? Consider the CAPE (cyclically adjusted price-to-earnings) ratio, which is currently right under 40. How does that compare to its historical average? See for yourself.
S&P 500 Shiller CAPE Ratio Chart
S&P 500 Shiller CAPE Ratio data by YCharts.
Last time it was that high, the dot-com bubble burst. So, history suggests we may be on the verge of a bear market.
What should investors do?
Can we predict with certainty that a market crash is on the horizon? Not really. There will be one eventually, for sure, but we don't know when, and it may or may not be caused by AI stocks. Even if we don't know for sure, however, it's important for investors to always be prepared. One reason to do so in this case is to purchase shares of companies that seem undervalued. Pharmaceutical giant Pfizer (NYSE: PFE) is an excellent choice in that regard.
The drugmaker has lost significant market value in recent years, as its financial results haven't been strong. The company may still have some tough days ahead. It's entering a period during which it will lose patent exclusivity for important products, according to management.. Two medicines that will lose exclusivity in the next couple of years are Eliquis, an anticoagulant, and Xtandi, a cancer medicine. But the healthcare specialist has the foundation in place to bounce back eventually.
Pfizer has a deep pipeline, including in large or rapidly growing therapeutic areas such as oncology and weight management. Pfizer is also implementing AI across its business to reduce costs. The company's earnings are holding up surprisingly well, considering its inconsistent revenue. And as Pfizer launches more brand-new products, top-line growth will eventually stabilize. Lastly, Pfizer's shares look fairly attractive, as they are trading at 9 times forward earnings, compared to the average of 18.6 for the healthcare sector.
If there is an AI-driven market crash, I'd predict that Pfizer's stock price will decline less than the prices of major AI companies. If there isn't, the company is well-positioned to bounce back from recent challenges in the long run.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.
Source: “AOL Money”
