Despite record-high prices, there’s growing concern among experts of a looming stock market correction, or even outright crash.
Falling political confidence, ongoing geopolitical conflicts, emerging trade disputes, and rising government borrowing costs are all sparking economic uncertainty both here in the UK and in the US. And with central banks cutting interest rates to protect the job market despite inflation remaining elevated, the bearish stock market concerns aren’t entirely unjustified.
So is there a catastrophe lurking just around the corner? Or are things secretly much stronger than they appear?
Bull vs bear
Analysts at JP Morgan and other leading institutions have highlighted their concerns about a potential market correction as we approach 2026, with most estimating a 5%-15% drawdown. While there are some market crash forecasts, these seem to be far less prominent, suggesting that while risk levels are elevated, they’re not yet at an extreme.
However, despite most analysts having a more cautious or negative outlook, there are some exceptions. For example, UBS has recently raised its guidance for the S&P 500 in 2026 to 6,800 points. The bank expects US stocks to retreat in the short-term but ultimately recover in the second half as tariff costs are managed, artificial intelligence (AI) begins delivering on efficiencies, and earnings remain resilient thanks to rate cuts.
Morgan Stanley’s put forward a similar argument, suggesting that share prices could temporary stall as valuations normalise before resuming a bullish trajectory next year.
What now?
With so many factors influencing the stock market, predicting what will happen in the coming weeks and months is almost impossible.
Given the economic challenges that both the UK and US markets face, I’m leaning on the side of caution, building up cash so that if the worst does come to pass, I’ll have the capital available to take advantage. And one stock that I’ve got my eye on is Toast (NYSE:TOST).
While not a household name in the UK, Toast’s one of the biggest cloud-based operating systems for restaurants in the US. Over 148,000 restaurants use the platform to handle payment & order processing, menu design, inventory & accounting management, kitchen display systems, payroll, and other critical operations.
In the second quarter of 2025 alone, almost $50bn of transactions moved through its platform – a 23% increase year on year. When combined with steady subscription income, the business generates enormous volumes of free cash flow. And with Toast recently signing new partnerships with Applebee’s and American Express, the group’s long-term potential continues to expand.
Risk versus reward
Its impressive financials haven’t gone unnoticed, and the stock subsequently trades at a premium valuation. But that could prove problematic given that weaker discretionary consumer spending has historically resulted in lower footfall for restaurants – a trend that has started to emerge among fast casual chains.
Current projections suggest that the US restaurant sector could be hit with a slowdown entering into 2026. That’s bad news for Toast, creating tough comparables, potentially enough to spook investors and test its share price. And this risk’s only compounded by fears of rising competition.
But at a better Toast price, the risks could be worth the potential reward. So if the stock market decides to throw a tantrum, this growth stock sits near the top of my Buy list, alongside other companies in my portfolio.
