With the US stock market once again reaching new all-time highs, many portfolios have enjoyed wonderful returns in 2025. Yet, while that’s obviously exciting, there’s a brewing concern of a potential correction approaching later this year. After all, recent US economic data is starting to look a bit wobbly as the potential impact of tariffs starts to materialise.
But could this be a rare opportunity to accelerate the journey towards reaching a £1m investment portfolio?
What’s going on?
Even when stripping out volatile food and energy prices, US inflation’s slowly ticking back up. Yet at the same time, the latest revisions to the US jobs report show signs of an economy slowing down. And higher prices combined with slower economic growth are an early indicator of potential stagflation.
That puts the Federal Reserve in a pretty sticky situation. Cutting interest rates will cause inflation to rise, while keeping them elevated might cause a further slowdown in economic growth. Pairing this with elevated stock market valuations points towards a looming correction if economic growth doesn’t rebound.
There’s no way of knowing the exact timing of the next stock market correction, but current consensus from analysts at Morgan Stanley suggests it could arrive as early as the third quarter of 2025.
Profiting from volatility
Stock market corrections are a natural part of every investment journey. And while they can be unpleasant to suffer, they can provide some lucrative buying opportunities for prudent long-term investors, even for typically less volatile enterprises.
Take Mastercard (NYSE:MA) as an example. In the 2022 stock market correction, the payment processing giant saw its market-cap shrink by as much as 20%. That’s obviously a significant change of pace compared to the stock’s typical growth trajectory.
However, while most investors were selling off shares, the few that used this volatility to buy at a discount have since gone on to double their money since October 2022. And this perfectly demonstrates how using a market correction can pave the way for impressive market-beating returns for patient long-term investors.
Could Mastercard win again?
Let’s assume the worst, and say that the US stock market takes another tumble on the back of an economic slowdown. Weaker consumer spending will likely translate into lower transaction volumes for Mastercard, likely sparking some selling activity from short-term focused investors.
However, as demonstrated countless times before, consumers are relying more and more on debit and credit cards to do their shopping. And that will likely enable transaction volumes to steadily recover alongside the economy. What’s more, roughly two-thirds of Mastercard’s payment volumes actually come from outside the US, where economic concerns are less prominent.
Of course, that doesn’t make Mastercard a guaranteed winner. With so much of the global market already under its belt, and tough competition emerging from China, long-term growth expectations are already starting to moderate. And with rising competition from novel fintech payment solutions, the group’s duopoly with Visa could already be getting attacked.
Nevertheless, management isn’t blind to these risks. And with an impressive track record of navigating through economic storms, as well as fending off potential disruptors, Mastercard shares could still be worth a closer look if the US stock market indeed decides to throw a tantrum in the future.
