Could growing economic uncertainty cause a stock market crash?

As economic and geopolitical tensions build, the risks of a stock market crash are growing, says this Fool, who is looking for protection.

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Growing geopolitical and economic uncertainty is increasing the chances of a stock market crash. 

If there is one thing the market hates more than anything else, it is uncertainty.

The situation in Ukraine has only added to the unsteady outlook for the global economy. Investors have had to deal with growing instability across the global economy since the beginning of 2020. 

Risks of a stock market crash

There are now plenty of reasons for investors to dump their stocks and move out of the market. The cost of living crisis, rising interest rates, geopolitical uncertainty, trade wars and the supply chain crisis are all threatening asset values. Against this backdrop, I think the chances of a stock market crash are growing. 

Unfortunately, there is no set guide investors can use to try and navigate a market crash. There are plenty of different scenarios that could play out over the next couple of months. It is impossible to predict which will play out and the industries that will struggle.

For example, 12 months ago, many investors and analysts were saying that the death of the oil industry was only just around the corner. Instead, the industry has outperformed the market over the past couple of months. Loftier oil prices have helped companies generate record profits.

At the same time, many high-flying tech stocks have fallen from grace as they have failed to meet their own ambitious growth targets. 

With this being the case, rather than trying to predict the next stock market crash, which is all but impossible, I have been buying companies I believe will be able to weather the storm. 

High-quality stocks 

I think it is unlikely any of the economic and geopolitical factors outlined above will significantly impact the demand for Games Workshop‘s miniature figurines. Neither do I believe it is likely that the demand for technology services from Computacenter will decline if there is a full-scale war in Ukraine.

The world is only becoming more and more reliant on technology, suggesting the demand for Computacenter’s services will only expand. The need may actually increase if firms try to offset rising prices with more tech. 

Companies like these are well-positioned to navigate the global economy’s growing challenges. Still, they are certainly not immune to growing headwinds. Both firms could have to deal with rising prices and supply chain disruption themselves. Therefore, I will not take their growth for granted, although I would buy both for my portfolio. 

All in all, while I think the chances of a stock market crash are growing as uncertainty builds, I am not going to let this influence my investment decision-making. I plan to keep investing in high-quality companies with the potential for growth over the next decade, and beyond. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Games Workshop. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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