Analysts have been warning of a stock market crash for weeks. Is this it? Tuesday (4 November) was brutal. Headlines reported more than $500bn wiped off the value of artificial intelligence (AI) chipmakers.
Michael Burry, the investor famed for betting against the sub-prime housing market, had placed heavy short positions against AI stocks Palantir and Nvidia. Bitcoin dipped below $100,000 for the first time since June, losing $45bn in value. The FTSE 100 fell around 1%, and my Self-Invested Personal Pension (SIPP) took a small hit too. Goldman Sachs and Morgan Stanley both issued warnings of an imminent correction.
Although looking closely at their statements, they’re a little less alarming. It seems the ‘imminent’ correction could arrive over the next year or two rather than this very second.
Equities are often volatile
Bad news sells, and the press loves a crisis story, but the market has shrugged off a lot of noise lately. The S&P 500‘s still up more than 15% in 2025, with dividends on top. Yesterday’s 1.17% decline is hardly the end of the world.
But there are reasons to be cautious. AI valuations are stretched, and we can’t be sure hyperscalers such as Amazon, Alphabet, Meta Platforms and Microsoft will see strong returns on the hundreds of billions they’re pumping into the tech. Outside of AI, many S&P 500 companies are struggle amid recession talk. We shouldn’t panic though. Stock markets never climb in a straight line forever, and pullbacks are inevitable.
Opportunities in dips
As a rule, I see market dips as an opportunity rather than a threat. I use them to buy solid companies that might be temporarily undervalued.
Right now, I’m watching Sage Group (LSE: SGE), a FTSE 100 company that develops accounting and payroll software for businesses worldwide. Its shares are up 17% over the last year and 76% over five, with dividends on top.
The shares are expensive as a result, at a price-to-earnings ratio of 30.3. That’s well above the FTSE 100 average of around 18, reflecting investors’ confidence in future growth.
Broker Citi placed Sage on “positive catalyst watch” on 10 October, highlighting its resilient performance in a challenging environment. The shares have underperformed year to date, but has the right levers to sustain growth and potential to accelerate if the macro picture improves. My big concern is that it could fall victim to AI, if that replicates the services it offers to customers, only more cheaply.
Long-term view
Last week, the Sage share price slipped 2.1%, which is hardly alarming given its long-term growth. I’m watching to see where it goes next. I think it’s a terrific company, and worth considering if the shares fall further.
Alternatively, I might top up my existing SIPP holdings, such as JD Sports, wealth manager M&G or data specialist London Stock Exchange Group. I won’t be looking to make a short-term profit, but take a lower advantage of a lower valuation and higher yield, with the aim of remaining holding for years while reinvesting my dividends to compound the total return.
I won’t panic if we do get a stock market crash. Instead, I’ll go shopping. If the doom-mongers are correct, there could be bargains galore.
