Is Wall Street heading towards a massive crash by 2026-end? Here's what history may be hinting at

The US stock market has so far had great year of returns, despite brief pockets of sharp selloff amid President Donald Trump’s flipflop policies and the raging conflict in the Middle East. However, a historical indicator is spooking investors about a possible big crash coming near the end of the year.

Amid AI frenzy, the tech-heavy Nasdaq has gained more than 11% in 2026 so far. S&P 500 and Dow Jones Industrial Average rose up to 10%. However, history indicates that Wall Street typically sees harsh bear attacks around November midterm elections.

A midterm election takes place halfway through the four-year term of a President. These polls decide the composition of the US Congress. All 435 seats in the US House of Representatives, along with one-third of the 100 seats in the US Senate, go up for vote. The composition of the Congress can have a major influence on what the President can do in the next two years of his term.


Donald Trump took charge as the 47th President of the United States on January 20, 2025. The midterm elections under his presidency are expected to kick off early in November, 2026.

Bears waiting to attack Wall Street?

For context, the S&P 500 was created in 1957. As many as 17 midterm elections have taken place since then. The index fell into market correction territory 12 times and dropped into bear market territory six times in these years, according to an analysis by The Motley Fool. This puts the odds of a correction and bear market at about 70% and 35%, respectively, in the months ahead.

The market soared early in Trump’s first term as President between 2017-2021, but hit a wall in 2018, the midterm year. At one point, it gave up 18.8% of its gains, according to Ned Davis Research’s tabulation of Dow Jones industrial average data as cited by NY Times.

Silver lining to the dark cloud?

Despite the rising worries and expectations of a big crash coming ahead, some optimism is also warranted. The Motley Fool's report cited Carson Research as saying that the six-month period following midterm elections (November to April) has historically been the strongest period of the four-year presidential cycle. The S&P 500 has returned an average of 14% during these six months.

This year, the market already faces a number of headwinds apart from the possible political turmoil that any election can bring. If Democrats win the 2026 midterm elections, it would result in a split Congress. However, despite a possible selloff later this year, analysts expect stocks to climb sharply next year. Wall Street's median target price puts the S&P 500 at 8,989 by July 2027, according to FactSet Research.

Also read: South Korea's Kospi plunges 31% in one month. Is the AI frenzy over?

AI bubble worries rise

Analysts meanwhile continue to worry about the AI frenzy having reached its peak. This has led to a massive selloff in South Korea’s Kospi, which has plunged more than 30% from its June peak as investors raised doubts whether the excessive AI investments of hyperscalers will actually pay off.

Popular American investor Michael Burry, best known for correctly predicting the 2008 housing crisis, is ramping up his bets against leading chipmakers and raising worries over a possible market crash in the near future.

Earlier this year, Burry wrote on a Substack post that he sees many indicators, both technical and fundamental, lining up for the same conclusion as the Dotcom crash. "1999 went where no market had gone before, and I would say so can this one...It is already there on a number of indicators," he said, arguing that massive venture capital flows, rising AI debt issuance, and extreme market optimism are creating conditions where valuations may detach from economic reality.

Also read: Stocks priced for ‘sunshine and rainbows’ now face earnings test

(With inputs from agencies)

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