A number of key players in the investment space have voiced their concerns regarding a potential stock market crash in 2026. Among them is Michael Burry, famously portrayed by Christian Bale in Adam McKay’s 2015 blockbuster hit ‘The Big Short‘.
The hedge fund manager has made comments recently about overinflated AI valuations, accusing firms of “spending money on each other“. He’s also pointed out the crossover of household equity wealth and real estate wealth. This rare event has only occurred twice before — in the late 1960s and late 1990s. Both previous instances were followed by multi-year bear markets.
But most critically, he has put in short positions on Nvidia and Palantir, two of the biggest tech giants driving the AI boom. So it’s safe to say Burry is not bullish on 2026. But what do other experts think — and should UK investors care?
Looking further afield
Thankfully, Burry is in the minority on this one. Some indicators, like the Buffett Indicator and ’18-year property cycles’ support his view, along with economist Harry Dent. But overall, major Wall Street banks are bullish.
Morgan Stanley believes the S&P 500 could reach 7,400-7,800 points in 2026, driven by rate cuts and AI efficiency. Meanwhile, Jamie Dimon of JPMorgan has noted potential ‘stagflation’ but not a definitive crash.
How to act (or not)
Fortunately for UK investors, I don’t see much reason to panic. Market downturns are inevitable. And when they happen, many people think “I should have sold“!
However, savvy investors with a long-term view usually aren’t phased. A properly balanced portfolio should weather market volatility and a crash should be seen as an opportunity to buy — not panic.
If the market does crash in 2026, I plan to stock up on some currently overvalued shares. One stock in particular that I think could be worth considering at a lower price is London Stock Exchange Group (LSE:LSEG).
A UK leader in AI
With a trailing price-to-earnings (P/E) ratio of around 50, LSE Group looks far more overvalued than most stocks on the FTSE 100.
A severe market downturn could slash its price by 20%-40%. This would create a bargain entry into this high-quality data and AI-enhanced UK powerhouse. Aside from managing the London Stock Exchange, the group brings in recurring revenues from subscriptions to its trading and data analytics platform (formerly Refinitiv).
Several factors support a strong recovery in the event of a dip. Not only does it have a wide moat but is well-positioned to benefit from growing AI adoption. In previous downturns, the stock has recovered by as much as 50% within 18 months.
That said, it’s not immune to risks. Since its revenue is tied to markets, a prolonged downturn could hit it harder than more defensive stocks. It also has no meaningful yield, leaving investors with little benefit while prices are stagnant.
Final thoughts
Nobody can definitely say for sure if the stock market will crash in 2026. But whether Burry and kin are correct or not, investors shouldn’t worry.
A well-diversified portfolio with a mix of defensive, growth and income stocks from various sectors should weather a downturn comfortably. Meanwhile, keeping cash aside to think about snapping up bargains like London Stock Exchange Group offers a chance to benefit from a crash.
