Fears about a stock market crash have risen sharply in recent weeks, with prominent investors like Michael Burry and Ray Dalio sounding the alarm.
The main themes cited are an AI bubble, unprecedented debt levels, and geopolitical tensions. Add to that the war in Iran, which has caused the largest oil and gas supply disruption in history.
Given this backdrop, it’s no wonder there’s such nervousness about a market meltdown. Here’s what I’m doing in response.
Historical perspective
The first thing I’m not going to do is panic, despite the unfolding Middle East conflict. Currently the messages are contradictory, with President Trump saying the war will end “very soon” while vowing to “go further“. Shipping through the Strait of Hormuz remains at a standstill.
It’s a fool’s errand to try to guess what will happen next, in my opinion. But I suspect Trump’s voters are not keen on a protracted war in the Middle East — nobody sensible is — and the US mid-term elections are later this year.
As for the stock market, a bit of historical context might help. According to LPL Financial, the market reaction to 26 separate geopolitical events over eight decades — including Pearl Harbour, the Cuban Missile Crisis, and the Tet Offensive in Vietnam — is “reassuring“.
The average pullback of the S&P 500 after such geopolitical events was 4.5% (and the median just 2.9%). And markets typically stabilised inside a month.
The exception is when the US economy fell into recession as happened in 1990 and 2001. However, unless oil stays above $100 a barrel for an extended period of time, LPL Financial doesn’t expect a recession this time.
As I type, oil has slipped to less than $90 per barrel.
Geopolitical events are difficult. It’s human nature to want to sell stocks and sit in cash…For long‑term investors, we believe there may be some reassurance in market history. Geopolitical events, while unsettling, typically do not cause significant damage to diversified portfolios… history tells us that stocks will display their resilience on the other side after the fog of war clears.
LPL Financial.
My response
What I’m going to do then is put some cash to work in the coming weeks, especially when dip-buying opportunities present themselves.
One falling share that keeps catching my eye is Diageo (LSE:DGE), the FTSE 100 spirits giant behind timeless brands like Johnnie Walker and Tanqueray. The stock is at multi-year lows after crashing 62% since January 2022.
Sentiment couldn’t be lower, with consumer spending still weak, drinking habits changing, and a recent 50% cut to the dividend. Organic net sales declined 2.8% in the last six months of 2025.
Yet I still see the ingredients here for a strong recovery at some point:
- New CEO Dave Lewis is a turnaround specialist.
- Guinness and Johnnie Walker continue to grow strongly worldwide.
- Diageo has various non-core assets it can sell to improve the balance sheet.
- Its brands are very underrepresented in the growing ready-to-drink alcohol category.
- Consumer spending power should improve if and when interest rates fall.
Any turnaround will take time, of course. But with a renewed focus on its strongest brands and a strengthened balance sheet, I think Diageo could potentially deliver a powerful turnaround.
As such, I’m interested in this beaten-down UK stock and might open a position soon.
