With the S&P 500 near record highs and both geopolitical and economic tensions on the rise, a growing number of commentators are turning bearish on US stocks. Some are even projecting a full-blown stock market crash in 2026.
As history has so perfectly demonstrated countless times before, when the market crashes, most investors are quick to rush for the exits and panic-sell their shares. Yet, this is a classic and potentially costly mistake. Here’s why.
Don’t try to time the market
Today, there are quite a few warning signs that US stock prices might be a bit overstretched.
The S&P 500’s price-to-earnings ratio is now near double its historical average, the level of unemployment’s on the rise, and even legendary investors like Warren Buffett were growing increasingly cautious – a strategy that his successor Gregg Abel’s continued.
But this was all true a year ago as well. And despite experts calling for a stock market crash in 2025 (and even 2024), it never materialised. That’s because, while they can seem obvious in hindsight, large market downturns are notoriously difficult to predict.
The data overwhelmingly shows that if investors just hold on through the volatility, their long-term portfolio performance often ends up being vastly superior.
Fun fact: according to JP Morgan, S&P 500 investors who held on through all the volatility between 2004 and 2024 (which included multiple market corrections and two major crashes) earned an average annualised return of 10.5%.
But investors who tried to time the market and subsequently missed out on just the 10 best days saw their average return slashed to just 6.2%. And those who missed out on the best 20 days only generated a 3.6% annualised return, barely keeping up with inflation.
What happens if disaster strikes?
Let’s assume the worst and say the S&P 500 does indeed crash this year. One of the best moves investors can make is instead of selling, think about buying. After all, when everyone’s in a panic, some terrific but expensive stocks can end up plummeting to dirt cheap discount territory.
Looking at my own portfolio, I’ve got my eye on several stocks I’m eager to buy more of at a better price. And that includes Axon Enterprise (NASDAQ:AXON).
As a quick introduction, Axon’s a leading provider of interconnected public safety technology. The company was originally focused on designing and manufacturing non-lethal Taser weapons for law enforcement. But today, it’s evolved into a comprehensive software and hardware enterprise that connects an entire ecosystem of body-worn cameras, dash cameras, drones, evidence management, investigation assistance, and dispatching solutions.
This ecosystem-first approach has created powerful network effects that lock in customers. With more data being processed by its platforms, Axon’s AI capabilities for fraud detection, facial recognition, and situational awareness are only amplifying its capabilities.
The only trouble is, this exceptional quality hasn’t gone unnoticed by other investors. At a forward price-to-earnings ratio of 81, the stock’s priced for perfection, inviting extreme volatility should anything go wrong. And with niche rivals like Cellebrite looking to chip away at its market share, Axon could be vulnerable to a price correction.
But if that happens, and the underlying business continues to impress, I’ll be standing by, ready to go shopping.
