Many traders and investors are asking the question ‘Are the markets going to drop in 2026?’. In this article I take a look at the current state of the markets and whether a drop could be possible and most importantly, what you can do if they do drop and in the meantime! Let’s get straight into it!
Are the markets going to drop in 2026? Where are they right now?
Currently many of the most popular and most liquid markets, are very overbought. They have reached record highs. Let’s take a look at some examples:
Are the markets going to drop? – Gold
Gold has reached record highs. The chart recently reached a price of circa 5,615 USD but they took a slight downturn from this – let’s take a look at the chart to see if we can get start to answer the question, are the markets going to drop in 2026:
As you can see from the daily chart, Gold has pulled back from it’s peak. Let’s take a look at what’s going on, on the monthly chart, as this can give a better ‘birds eye’ view:
As you can see on the monthly chart, Gold has reached record highs. The RSI is currently very overextended and it wouldn’t be surprising if the market were to pull back farther than the little dip it’s made on the daily timeframe. However, nobody can predict whether the markets are going to drop – or what they are going to do. The FEDS have cut interest rates in America and this can have a positive effect on some of the markets. We are in a bit of an unprecedented situation. History tells us that when so many markets reach these types of highs, they do pull back quite a bit. It may be just a question of time!
Let’s take a look at the NASDAQ…
Are the markets going to drop? -NASDAQ
As with the case of Gold, you can see on the monthly timeframe, that the NASDAQ has sailed sky high. Take a look at the RSI and the MACD which is now bumping over to the downside! The green histogram bars on the MACD indicator are losing their pigment meaning they are losing strength currently and they are becoming smaller in size! For information I have added what happened to the markets during Covid and also the inflation struggles which have happened over the last few years and the effect of the FED’s interest rate increases on the markets.
The soaring prices on the NASDAQ have partly been inflated by expectations concerning AI and future profitability predictions surrounding this. Some people believe the AI bubble could burst. Nobody truly knows what will happen, however.
Let’s also take a look at the S&P 500 chart for good measure!
S&P 500
As you can see, it’s the same story on the monthly chart for the S&P 500! RSI over extended, MACD bumping over, prices at record highs.
So what to do in the scenario that the markets do ‘pull back’
Try and keep some money aside to take advantage of them on their way back up. Experienced traders and investors do not panic when the markets drop – they have dollar signs in the eyes! There is a saying that most profit is made at the time of purchase, not sale! The wealthy investors will be watching and waiting, and going shopping at the relevant time! Will you be one of them, or will you start panicking? Which one do you want to be?
It’s a good idea to do some research before the markets pull back, into which solid stocks could generate solid returns after some time. It’s a good idea to pick stocks with healthy balance sheets, in sectors which are likely to do well, and try and be diversified to hedge your risk. I posted a video on how you can carry out fundamental analysis of a balance sheet or profit statement, which you may find helpful:
Traders can manage risk in a slightly different way – there are plenty of articles on this blog about how you can manage risk. Currently, for example, I am entering small positions until the market starts moving in my favour and then I load up. This is similar to the averaging up which investors do, but I do this in trading now as well.
Conclusion – are the markets going to drop
My strong suggestion to you is to not fear the question ‘are the markets going to drop’ but rather see the this as an inevitable situation and a significant money making opportunity! Plan for the drop to happen – it will, periodically! Keep cash aside for these times to be in the best possible position, to take full advantage.
I also prepared a YouTube video on this issue which you may find helpful to watch:
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