Will the stock market crash before 2027?

The stock market feels a bit wobbly at the moment. As a result of the global sell-off in bonds, we’ve seen the FTSE 100 index retreat from 10,900 to 10,500.

Could we see a crash this year? Here’s my take.

There’s little euphoria

History shows that a stock market crash is never too far away. If we take a crash to mean a drop of 20% or more (in a short space of time), we get one about every six years or so, on average.

As for whether we’ll see one this year though, my gut feeling is that we won’t. There are several reasons why.

One is that there’s very little euphoria in the market right now. Typically, crashes come after a period of euphoria in which everyone is aggressively piling into shares (like they were in 2021).

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”
Sir John Templeton

As an example of the lack of euphoria in the market, you could take the fact that within the FTSE 100, about half of the stocks in the index are 15% or more below their 52-week highs. Alternatively, you could take the fact that about 400 of the 500 S&P 500 stocks are currently trading below their 50-day moving averages.

Valuations aren’t stretched

Another reason I’m not expecting a crash in the near term is that valuations don’t look stretched. Often, crashes occur when valuations are sky-high.

A good example on the valuation front is Nvidia, which is the largest company in the world today. It’s currently trading on a forward-looking price-to-earnings (P/E) ratio of just 15.

Elsewhere in the S&P 500, Alphabet has a P/E ratio of 17. Amazon is on 20.

Here in the UK, we have the likes of Barclays and Lloyds trading on P/E ratios of 10 or less. Overall, valuations look very reasonable to me.

We could see further weakness

Having said all that, we can’t rule out further stock market weakness in 2026. Especially with bond yields rising (higher yields present investors with an alternative to stocks).

So, it could be worth thinking a little defensively. That’s what I’m doing at the moment.

A defensive investment to consider

One stock that could be worth considering as a defensive investment is GSK (LSE: GSK). It’s a leading pharmaceutical company.

Healthcare is generally a defensive sector. No matter what’s happening in the economy or stock market, demand for medicines and vaccines tends to stay robust.

Meanwhile, GSK is trading at a low valuation today. With analysts forecasting earnings per share of 179p for 2026, the P/E ratio is only 10.

That kind of earnings multiple offers a decent margin of safety. For example, it’s unlikely that the valuation will halve.