With an historical average annualized total return of 10%, the S&P 500 index (^GSPC 0.43%) has proven itself to be a wonderful tool for people to build wealth. However, its gains in the past decade have been significantly higher than most observers probably would've predicted.
The stock market has now done something that has only happened one other time since 1871. Should investors be worried in 2026 and beyond?
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A high valuation might forecast negative returns
In the same way smart investors judge the valuation of individual stocks, it's a good idea to assess the overall market. The S&P 500 CAPE ratio, a closely watched metric that factors in the average of 10-year cyclically adjusted earnings, currently sits at 40.9. The last time it was in the same ballpark was during the dot-com bubble in 1999 and 2000. Clearly, the market's valuation is very high, which can worry investors.
Research reveals that the S&P 500's annualized returns over the next decade could be negative.
SNPINDEX: ^GSPC
Key Data Points
Be an optimist, but lower expectations
When the outlook is gloomy, it's understandable that investors are hesitant to put money to work. While returns might not resemble the impressive 16% annualized gains of the past 10 years, I believe it's still a good time to invest in the stock market in 2026. Investors who have a time horizon spanning decades are likely to see a favorable result.
Along the same vein, it's always a good idea to be an optimist. This positive mindset will encourage you to save and invest because your future depends on it.
