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“Nonetheless, as concentration has risen, so has the idiosyncratic risk embedded in the S&P 500 and investor dependence on the continued strength of the largest US companies,” Snider adds.

Are US stocks in a bubble?

“The US equity market’s current combination of elevated valuations, extreme concentration, and strong recent returns rhymes with a handful of overextended equity markets during the last century,” according to Goldman Sachs Research. But even though some of the most notable financial market booms over the past 100 years were followed by steep declines in equities, some features of those episodes are missing today.

For example, speculative trading activity rose sharply in 2025 but remains well below the highs of 2000 or 2021. Broad-based equity flows have recently been subdued.

In contrast with the booms of 2000 and 2021, IPO activity in 2025 was modest, although Goldman Sachs Research expects volumes to increase in 2026. Leverage on corporate balance sheets is rising but remains low relative to history.

What are the biggest risks to the US stock market in 2026?

The biggest risks to an equity market rally are weaker than expected economic growth or a hawkish shift by the Fed. “Neither appears likely in the near future,” Snider notes.

Goldman Sachs Research forecasts US GDP to grow 2.7% this year, and our economists expect the Fed to make two rate cuts of 25 basis points each (as of January 6).

Historically, the S&P 500 P/E multiple has risen by an average of 5%-10% during 12-month periods of stable or accelerating US economic growth; has risen by a similar 5%-10% magnitude during periods of non-recessionary rate cuts; and has increased by roughly 10%-15% when both conditions occurred simultaneously, according to Goldman Sachs Research.

What does AI spending mean for US stocks?

Also among the key risks to stock market returns are the trajectory of AI capex, returns on that investment spending, and the impact of AI adoption. The largest public hyperscale tech companies had roughly $400 billion of capital expenditures in 2025, nearly 70% more than 2024.

Goldman Sachs Research expects AI investment to continue to increase this year. But as capex is on track to reach 75% of cash flows—similar to tech company expenditures in the late 1990s—spending growth going forward will increasingly rely on debt funding.

“History shows a mixed track record regarding the eventual success of first movers in periods of major technological innovation,” Snider writes. “While odds are good that some of today’s largest companies achieve that success, the magnitudes of current spending and market caps alongside increasing competition within the group suggest a diminishing probability that all of today’s market leaders generate enough long-term profits to sufficiently reward today’s investors.”