In this video: Will stocks see a 10% drop soon? Let's discuss! Video by Benjamin Cowen.
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Market corrections of 10% or more occur approximately once per year on average and are considered a natural part of the market cycle. For 2026, several factors have increased the probability of such a pullback.
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Market Outlook
-High Valuations: As of February 2, 2026, the S&P 500 forward P/E ratio is approximately 22, well above its 30-year average of 17.
-CAPE Ratio: The market's Cyclically Adjusted Price-to-Earnings (CAPE) ratio is near 40, a level reached only once before—prior to the dot-com crash in 2000.
-Macroeconomic Risks: Sticky inflation, geopolitical volatility, and uncertainty surrounding the Federal Reserve leadership—specifically the transition of the Fed Chair to Kevin Warsh—could trigger investor caution.
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