Stocks are in a late-stage bubble and poised to crash 21% next year, while Treasury yields above 5% will signal a new era of tight money, analysts say

Investors should enjoy the final months of 2026 while they can as the AI-led stock market boom is due to go bust soon, according to analysts.

For now, there are still gains to be had. James Reilly, senior markets economist at Capital Economics, reiterated an earlier forecast for the S&P 500 to end this year at 8,250, up 7.7% from Friday’s close, then plunge 21% to 6,500 by the end of 2027.

“On balance, we think the data look consistent with a late-stage bubble,” he wrote in a note on Thursday. “Most of the factors we consider are at, or close to, levels that have preceded past stock market peaks.”

Reilly flagged several bubble indicators that he’s been tracking:

Stock valuations are consistent with a late-stage bubble. For example, the market’s cyclically adjusted price-to-earnings ratio is close to its dotcom peak, while the S&P 500’s valuation compared to Treasury bonds is........

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