The stock market seems to have shaken off the tariff announcements that caused prices to fall sharply. But it’s almost certain to crash again at some point and the time to prepare is now.
Predicting when the next downturn is going to come is almost impossible. Despite this, there are things investors can do to make sure they’re as ready as possible.
When’s the next crash?
Share prices might have recovered from the effect of US tariff announcements. But I’m not sure the stock market is entirely out of the woods yet.
So far, there hasn’t been any sign of the impact of these policies on corporate profits. That, however, is likely to change over the next couple of months.
There are no guarantees – and I’m certainly not making predictions – but companies reporting lower profits and lowering guidance is a real possibility. And that could weigh on prices.
The strong recovery means anyone who felt uneasy when the market crashed in April now has a chance to get ready for the next downturn. And there are a few ways of doing this.
Portfolio allocation
In the last downturn, some stocks held up better than others, which is not at all unusual in a stock market crash. But investors should pay attention to what these might be.
Anyone who’s concerned about volatility in the near future might want to consider companies like Coca-Cola. While the S&P 500 fell sharply, the stock held up relatively well.
The time to consider buying this type of stock, however, isn’t when other investors are trying to find safety in a crisis. It’s when they aren’t thinking about this and are looking elsewhere.
Right now, I don’t think Coca-Cola looks like exceptional value. But there are some opportunities elsewhere that I think could be useful additions to a portfolio.
Unilever
FTSE 100 consumer products company Unilever (LSE:ULVR) is an interesting stock to consider. It has a lot of the hallmarks of a stock that can be resilient in a volatile stock market.
Demand for the firm’s products tends to be relatively resilient. It makes things that people need on a day-to-day basis regardless of what’s going on in the wider economy.
The risk with this type of business is that barriers to entry are low and this can make the space competitive. That means it’s important for a company to find a way to differentiate itself.
Unilever looks to do this with strong brands and wide distribution. These give the firm a big advantage when it comes to negotiating with retailers, which sets it apart from its rivals.
Long-term investing
Over the long term, having a strong competitive position in a durable and growing industry is valuable. And this is what makes Unilever attractive from an investment perspective.
I think it’s also an interesting stock for investors to consider as a way of preparing for the next stock market crash. I’m certain there’s going to be another one, the only question is when.
The time for investors to figure out how to prepare for this, though, isn’t when it’s already happening. With share prices having more or less recovered, the time is now.
