Here’s Why the Stock Market Could Crash Next Month

The stock market just had one of the fastest comebacks ever. But not everyone thinks the good times will keep going without trouble. A YouTuber called The Patient Investor, who has over 41,000 subscribers, warned that the market may be entering a dangerous happy phase, like we saw in 1999 and 2021.

The S&P 500 bounced back from its low in only 11 days. That is much faster than past big rebounds. For comparison, the dot-com recovery took over 1,100 days. This fast comeback has pushed investor confidence to extreme levels, especially in AI and computer chip stocks.

One of the biggest concerns comes from the tech sector itself. The tech ETF climbed 20% in a single month, a move only seen before the 1999 dot-com peak and the 1929 market crash. Semiconductor stocks have become the center of the rally as traders pour money into anything tied to AI, data centers, or chip manufacturing.

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The analyst pointed to the semiconductor index RSI hitting 85 on the monthly timeframe. That level is considered deeply overbought and has rarely appeared over the last two decades. Investors are also becoming heavily bullish in the options market. About 60% of S&P 500 options volume is now tied to call options, showing traders expect prices to keep rising.

This excitement around AI has created comparisons to the 2021 boom when EV, clean energy, and plant-based stocks exploded higher before collapsing in 2022. Back then, investors chased momentum late into the cycle and many ended up buying near the top.

The same psychology may be repeating itself in 2026. Stocks tied to AI infrastructure keep climbing fast, even as many other parts of the market fall behind. The rally is still narrow. Chip and AI companies are carrying most of the weight.

The Fed Could Become the Main Catalyst

The next big risk comes from the Federal Reserve meeting on June 16–17. Investors are watching incoming Fed chair Kevin Warsh closely. He likes lower interest rates but also wants big changes inside the Fed system.

Markets usually like stability and clear communication from central bankers. Jerome Powell followed a steady communication style for years, but Warsh may take a different direction. One proposal worrying investors is his criticism of quantitative easing and forward guidance.

Forward guidance has been a major tool for helping bond markets understand future rate expectations. Removing or weakening that guidance could increase uncertainty across stocks and bonds. The 10-year Treasury yield already trades between 4.17% and 4.39%, with the 30-year yield near 5%.

If Warsh delivers a very dovish message, the analyst believes stocks could continue higher in a “party like 1999” scenario where speculative assets explode upward again. But if markets hear unexpected policy changes or hawkish comments, the rally could hit a major resistance zone and reverse quickly.

Why the Market Still Looks Vulnerable

Even though enthusiasm is high, the analyst clarified that he is not bearish on stocks over the long run. S&P 500 earnings remain strong, and valuations outside some AI names are not extremely stretched.

Still, the potential payoff doesn’t look as good after such a fast rally. Investors have priced many AI companies as if everything will go perfectly. That leaves little room for bad news if earnings growth slows or money gets harder to borrow.

The market also appears disconnected internally. AI and semiconductor names continue climbing, but many growth stocks and trading platforms are failing to keep pace. That type of divergence can sometimes appear near major turning points.

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Factors Driving Stock Prices Right Now

Corporate earnings are one of the biggest reasons stocks keep going up. In the first quarter of 2026, S&P 500 earnings grew 28.2% compared to the same time last year. That is the fastest growth since 2021. Analysts also raised their full-year profit growth forecasts to 22.6%, and profit margins hit a record 13.4%. About 78% of S&P 500 companies beat Wall Street earnings estimates. That helped the index close at an all-time high of 7,398.93 on May 8.

AI spending is also flooding into the market at an enormous pace. The five biggest tech companies are expected to spend $751 billion this year on AI chips, data centers, and buildings. Investors keep betting that AI will help companies make more money for years. That optimism has pushed the S&P 500 up 8.1% so far this year.

Inflation and world events are still big threats to the rally. Bond yields remain high because the Federal Reserve is keeping rates steady. That lowers the chance of big rate cuts. Markets are also watching April inflation data closely. Economists expect inflation to be 3.7% compared to last year.

Also, oil prices climbed after President Donald Trump rejected Iran’s latest proposal tied to the ongoing conflict, adding fresh inflation pressure ahead of the Trump-Xi summit scheduled for May 13.

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Frequently Asked Questions

How do stocks make you money

People make money from stocks when the share price goes up after they buy. Some companies also pay dividends, which are small cash payments given to shareholders. The goal is usually to grow your investment over time.

How long should you hold a stock

Many investors hold stocks for several years to give them time to grow. Keeping stocks longer can also help ride out short-term market drops. Still, the right holding period depends on your goals and risk level.

Who is CEO of the stock market

There is no single CEO of the entire stock market. Each stock exchange has its own leadership team and chief executive. For example, Ashishkumar Chauhan leads the National Stock Exchange of India.