US stock market has enjoyed a long run without a major fall in 2025. Stock prices have gone up, confidence has risen and corrections have been short and shallow. But long stretches of calm can create hidden risks. Many analysts say 2026 could be the year the world faces that risk.
The centre of global market power remains the United States. If the US stumbles, the world feels it. For now, Wall Street continues to climb, aided by strong fund flows, big technology profits and consumer spending. But high prices make the market extremely sensitive to shocks. Even a small negative event can cause a sharp fall if investors start questioning these high valuations.
Experts looking at 2026 market meltdown
Federal Reserve Chair Jerome Powell in September cautioned that “equity prices are fairly highly valued.” When stock prices rise faster than the real performance of companies, even a small shift in sentiment can spark fear and selling.
Goldman Sachs CEO David Solomon told investors in Hong Kong that “it’s likely there’ll be a 10 to 20 per cent drawdown in equity markets sometime in the next 12 to 24 months.” He added that “things run, and then they pull back so people can reassess… A 10 to 15 per cent drawdown happens often, even through positive market cycles,” and that such pullbacks do not necessarily change how long-term capital should be allocated.
Morgan Stanley CEO Ted Pick shared a similar view, saying, “We should also welcome the possibility that there would be drawdowns, 10 to 15 per cent drawdowns that are not driven by some sort of macro cliff effect.”
AI and tech stocks could become the weak spot
The excitement around artificial intelligence has pushed large US tech companies to record valuations. Nvidia’s market value is now around $4.88 trillion. Investors debate whether these prices can continue without interruption. Nigel Green, CEO, deVere Group said only 5 per cent of AI projects are managing to boost profits. He said that “90 per cent” of AI companies could fail, adding, “The situation with AI is going to play out similarly.”
Antler founder Magnus Grimeland believes the opposite. He said on CNBC, “What makes this a little bit different from a bubble and makes it very different from dotcom is that there’s really real revenues behind a lot of this growth. Think about how quickly our behaviour online has changed, right? … 100 per cent of my searches a year ago [were on] Google. Now it’s probably 20 per cent.”
A Bank of America survey found that most investors still believe an AI bubble exists. That fear has also reached central banks. The Bank of England has warned that a sharp decline in AI-linked stocks could spill into the broader market.
A change at the Fed
One of the biggest events of 2026 will be the end of Powell’s term in May. President Donald Trump is expected to choose the next Fed head. Kevin Hassett is widely seen as the leading candidate and supports lower interest rates. Rate cuts can lift markets, but cutting rates while inflation is rising can trigger instability. A new Fed leader can also cause uncertainty, as investors test whether the central bank remains credible.
Some numbers show early signs of trouble. Deloitte expects US unemployment to rise to 4.5 per cent by the end of 2026. Inflation may climb again if new tariffs push prices higher. Jamie Dimon warns a slowdown is still possible despite strong GDP. Recession risks measured by market surveys are rising. Commercial real estate remains damaged by empty offices. Banks are preparing for possible losses. The inverted yield curve continues to warn that financial stress is building below the surface.
Dhaval Joshi of BCA Research wrote, “The greater risk to the world economy in 2026-27 is not that a recession triggers a market crash, but that a market crash triggers a recession.”