A stock market crash may be coming. Why? Valuations look elevated. The conflict in Iran could go on and on. Analysts have predicted $160 per barrel of oil, which will ignote inflation. All the while, untold billions are being poured into artificial intelligence with scant return on investment – unless you include the cratering share prices of stocks in the tech companies threatened by AI.
That’s what people are saying, anyway. And it’s true that, for the above reasons, the markets are looking more fragile than they have in perhaps years. But guess what? I’m not worried.
Get greedy
In the 2020s so far, there have been three periods of extreme pessimism around stocks and shares not including the current malaise. I’m referring to March 2020 in the midst of the pandemic, October 2022 when a certain Ms Truss was drawing comparisons to a wilting vegetable, and April 2025 when another brash and blonde leader of a country was talking a lot about tariffs.
Do you know what’s funny? Those were the three best buying opportunities in recent years too. Many stocks were selling at bargain basement prices. Even the slower-growing FTSE 100 had plenty of stocks double or triple in value in a short amount of time.
What’s the Warren Buffett quote again? “Be fearful when others are greedy and greedy when others are fearful.” The best strategy when the chips are down – as history tells us – is to keep buying. And cautious investors maye wish to keep a small portion of their holdings in cash to take advantage of any dips.
With all that said, this is one of those things that’s a lot easier in theory than in practice. I remember being very worried about my shrinking life savings when Covid was threatening to destroy the world economy in 2020. And market crashes can have terrible consequences like company closures or job losses too.
Cheap offerings?
One stock I’ve added to my watchlist recently is International Consolidated Airlines (LSE: IAG) – the airline group that controls British Airways, Iberia and Vueling. While my exposure to similar stocks has prevented me from buying yet, this might have to change if the share price falls much further.
Why? Because the mass cancellation of flights due to the awful goings on in the Middle East has brought the share price down by 22% in a couple of weeks. The price-to-earnings (P/E) ratio has dropped to 6.2 when the FTSE 100 average is around 18. If you take a look at some of the stocks with low-single-digit P/Es from the last few years, you’ll find many of them have surged thereafter.
There are no guarantees, of course. Holiday bookings have already taken a downturn since the start of the Iran crisis. Earnings may drop in the years to come and that low P/E may look justified.
But none of us can predict a stock market crash ahead of time. That’s why I’m preparing for both good and bad outcomes, and that means keeping abreast of possible stocks like IAG that could offer above-average market returns for years to come.
