Volatility on the rise

While sudden aggressive drops in stock prices are usually caused by a clear, distinct catalyst, that’s not what’s happened this time around. Instead, the recent downward pressure on the US tech sector seems to be originating from a variety of converging factors.

Weaker-than-expected earnings, combined with further AI capex by Microsoft, triggered an initial wave of selling. This was followed by the launch of next generation AI assistant Claude Cowork by Anthropic that investors believe threatens existing enterprise software solutions.

Combining all this with further early earnings misses and a weaker outlook from key S&P 500 players alongside premium valuations, it isn’t so surprising that volatility has started spiking.

Yet, if some institutional forecasts prove to be accurate, this might be just the beginning. US unemployment’s steadily ticking up, inflation’s proving sticky, and consumer credit quality’s in decline.

While none of this guarantees a recession, the analyst team at BCA Research has estimated the probability at a concerning 60%. And as for the S&P 500, BCA has projected that America’s flagship index could tumble to between 4,200 and 4,500. Compared to where the index stands today, that suggests up to a 40% crash could be on the horizon!

Keep calm and carry on

While concerning, it’s important to highlight that BCA currently has one of the most bearish outlooks for the US market. By comparison, the experts at Goldman Sachs have projected only a 25% chance of a recession paired with a 15% pullback should things turn to custard.

Regardless, the best strategy for navigating volatility remains the same: focus on the business, not the stock price. And if the business continues to thrive while the share price dives, it may be time to consider going shopping.

With that in mind, I’m keeping a close eye on Toast (NYSE:TOST).

An emerging buying opportunity?

The one-stop-shop restaurant tech platform is now trading at a 52-week low, stumbling by over 16% since the start of the year. That isn’t entirely surprising given the stock still trades at a fairly expensive forward price-to-earnings ratio of 22. Yet, looking at the underlying business, the company seems to be thriving.

More than 156,000 restaurants now rely on its platform worldwide, driving impressive annual subscription revenue, alongside continuous cash flows from small fees on all transactions moving through its network.

Obviously, a weaker US economic outlook doesn’t bode well for this business. After all, if consumers stop eating out, that means fewer restaurant transactions, resulting in a potentially painful slowdown. And given the high failure rate of restaurants in general, a wider recession will undoubtedly have a nasty impact on its subscription income as well.

Yet, with the stock selling off on what is ultimately a cyclical headwind, it’s hard not to be tempted by this high-growth enterprise. That’s why I think investors should consider taking a closer look. And it’s not the only potential S&P 500 opportunity I’ve got on my radar right now.

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A rising fintech

First on the list is Toast (NYSE:TOST). The firm offers a complete restaurant operating system, solving the headaches of digital ordering, reservations, marketing, supply chain management, payroll, accounting, analytics, and even financing.

This all-in-one solution is already deployed at over 156,000 locations with 22,000 added since the start of 2025. And with adoption accelerating, its latest third-quarter results showed 30% revenue expansion, a 147% operating profit surge, and an upgrade to full-year guidance.

Despite this record performance, the shares are actually down by around 8% since the start of the year. Why?

The fear is that with pressure rising on everyday American households, restaurant trips could be cut back. And since Toast makes the bulk of its money by charging a small transaction fee on each order, that signals a potential slowdown.

It’s a valid concern. But it might be overstated.

Even if footfall waivers, the added cost-saving benefits of deploying Toast could turn this into an adoption tailwind, resulting in further location growth offsetting the impact on earnings. That obviously isn’t guaranteed, but at a forward price-to-earnings (P/E) ratio of 27, it’s a risk I’m willing to take.

Getting more exotic

The second stock I’ve been buying is a bit more volatile – Sezzle (NASDAQ:SEZL). Unlike Toast, Sezzle’s been a strong performer in 2025, rising by 20% since the start of the year. Yet at one point, it was up over 300%!

The Buy Now, Pay Later (BNPL) platform has grown dramatically over the last 12 months, sparking over-enthusiasm that eventually tumbled back to reality. But then the shares kept falling. And now the stock trades at a dirt cheap forward P/E of just 12.8.

Yet once again, the share price doesn’t align with the fundamentals.

Thanks to its subscription-based approach to BNPL, Sezzle has the highest operating profit margins in the industry at 30%. And in its latest results, revenue skyrocketed by 67% paired with a 71% jump in earnings, driven a 53% surge in transactions to 9.5 million during the quarter.

So why’s the market pricing this stock so cheaply? Again, the answer lies in macroeconomics. A weaker US consumer increases the credit risk of Sezzle users not keeping up with payments. And the group’s provisions for credit losses did tick up slightly – a potential early warning sign that this has already started to happen.

However, this uptick seems to be a seasonal shift rather than a structural one. In fact, management actually lowered its credit loss provision guidance for 2025, indicating confidence in the quality of its credit. And if market conditions turn out to be better than investors are expecting, a rebound could emerge.

The bottom line

Out of these stocks, Sezzle’s definitely the riskier investment. But in my opinion, both look like underdogs that could thrive in 2026 once economic conditions stabilise. That’s why I think investors hunting for shares to buy may want to take a closer look at these under-the-radar opportunities. Yet, these aren’t the only shares I’ve been buying lately.

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In fact, anyone who put £1,000 to work in a passive index tracker five years ago has now more than doubled their money with around £2,085. And for stock pickers who exclusively invested in Nvidia, that initial £1,000 is today worth a staggering £13,407!

Of course, the question now becomes, can the largest US stocks continue delivering such phenomenal gains moving forward? And just how much money could a 50-year-old investor expect to make before retirement comes knocking at 67?

Setting realistic expectations

A 108% total return from the S&P 500 over the last five years is pretty exceptional. After all, that translates into an average annualised return of 15.8% a year compared to the usual 10% that the US stock market generates.

Is this likely to last? Sadly, most likely not.

The last five years have been pretty extraordinary, with the US economy receiving unprecedented stimulus in 2020, a rapid post-pandemic recovery in 2021, and continued business outperformance from tech giants like Nvidia in the years since.

Such events are pretty rare. And while we have seen periods of massive outperformance from the S&P 500 in the past, these have always been followed by an eventual reversion to the longer-term average of 10%.

The good news is, 10% is more than enough to build up impressive retirement wealth even when starting from scratch at the age of 50 with only £500 a month to spare. And by letting compounding work its magic for 17 consistent years, a brand new portfolio could go on to reach £266,132.

Maximising wealth

Having an extra quarter-million for retirement is definitely helpful. But for successful stock pickers, even more wealth could be unlocked. And even if a portfolio only generates an extra 3% above average, that’s enough to add roughly another £100,000 to a pension pot.

There’s never any guarantee with investing. But one S&P 500 business I’ve recently added to my portfolio is Toast (NYSE:TOST).

The cloud-based restaurant management platform is now powering 156,000 locations across the US, enabling restaurateurs to handle payment processing, ordering, delivery, employee payroll, and even capital financing.

By offering easy and quick solutions to almost all the headaches restaurant owners have to deal with, adoption is accelerating, and that’s translated into phenomenal revenue and profit growth. Of course, there are still risks.

Toast is not the only restaurant tech-solution out there, limiting its subscription pricing power and transaction take rates. The latter is a far bigger handicap since the bulk of cash flow comes from charging small fees on each transaction moving through its platform. It also makes the business far more sensitive to economic downturns since consumers are less likely to dine out when trying to minimise discretionary spending.

Nevertheless, I remain bullish for the long run. There are over 700,000 restaurants in the US alone. And while Toast already controls the lion’s portion of market share, its growth potential remains substantial, especially once it accelerates international expansion. That’s why I think growth investors may want to take a closer look.

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Falling political confidence, ongoing geopolitical conflicts, emerging trade disputes, and rising government borrowing costs are all sparking economic uncertainty both here in the UK and in the US. And with central banks cutting interest rates to protect the job market despite inflation remaining elevated, the bearish stock market concerns aren’t entirely unjustified.

So is there a catastrophe lurking just around the corner? Or are things secretly much stronger than they appear?

Bull vs bear

Analysts at JP Morgan and other leading institutions have highlighted their concerns about a potential market correction as we approach 2026, with most estimating a 5%-15% drawdown. While there are some market crash forecasts, these seem to be far less prominent, suggesting that while risk levels are elevated, they’re not yet at an extreme.

However, despite most analysts having a more cautious or negative outlook, there are some exceptions. For example, UBS has recently raised its guidance for the S&P 500 in 2026 to 6,800 points. The bank expects US stocks to retreat in the short-term but ultimately recover in the second half as tariff costs are managed, artificial intelligence (AI) begins delivering on efficiencies, and earnings remain resilient thanks to rate cuts.

Morgan Stanley’s put forward a similar argument, suggesting that share prices could temporary stall as valuations normalise before resuming a bullish trajectory next year.

What now?

With so many factors influencing the stock market, predicting what will happen in the coming weeks and months is almost impossible.

Given the economic challenges that both the UK and US markets face, I’m leaning on the side of caution, building up cash so that if the worst does come to pass, I’ll have the capital available to take advantage. And one stock that I’ve got my eye on is Toast (NYSE:TOST).

While not a household name in the UK, Toast’s one of the biggest cloud-based operating systems for restaurants in the US. Over 148,000 restaurants use the platform to handle payment & order processing, menu design, inventory & accounting management, kitchen display systems, payroll, and other critical operations.

In the second quarter of 2025 alone, almost $50bn of transactions moved through its platform – a 23% increase year on year. When combined with steady subscription income, the business generates enormous volumes of free cash flow. And with Toast recently signing new partnerships with Applebee’s and American Express, the group’s long-term potential continues to expand.

Risk versus reward

Its impressive financials haven’t gone unnoticed, and the stock subsequently trades at a premium valuation. But that could prove problematic given that weaker discretionary consumer spending has historically resulted in lower footfall for restaurants – a trend that has started to emerge among fast casual chains.

Current projections suggest that the US restaurant sector could be hit with a slowdown entering into 2026. That’s bad news for Toast, creating tough comparables, potentially enough to spook investors and test its share price. And this risk’s only compounded by fears of rising competition.

But at a better Toast price, the risks could be worth the potential reward. So if the stock market decides to throw a tantrum, this growth stock sits near the top of my Buy list, alongside other companies in my portfolio.

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So, what’s behind the rising bearish sentiment? And what should investors do to prepare?

The impact of tariffs

The impact of US tariffs is hardly a new story in the headlines. However, April is the month when investors get to find out exactly how much short-term damage they might be doing to the US economy. The latest forecast from GDPNow anticipates a 2.8% contraction of US GDP in the first quarter of 2025. However, on April 30, the Bureau of Economic Analysis will release its GDP report for the first quarter. If it reveals worse-than-expected results, a stock market sell-off could follow.

Moreover, volatility could continue beyond April. As tariffs and short-term inflation rise, the journey towards lower interest rates could be extended. And the pressure on businesses with debt-heavy balance sheets may take longer to lift.

Should GDP continue to contract in the second quarter of 2025, a technical recession would officially hit America. And recessions come with lower consumer spending, lower growth, and higher uncertainty. Needless to say, that’s the perfect recipe for creating investor panic, especially for some US stocks trading at lofty valuations.

A rare opportunity

No one knows for certain whether the stock market will crash by the end of April. Personally, my hunch is that we’re more likely to see a steeper correction rather than a full-blown crash. Regardless, the strategy to capitalise on this volatility remains the same – conserve cash and create a shopping list.

By having some dry powder at the ready and a list of stocks already researched, investors can quickly deploy capital into potentially winning opportunities.

For example, one US business I’ve got my eye on is Toast (NYSE:TOST). The technology firm offers hardware and software that allows restaurateurs to manage operations. That includes ordering, payment processing, inventory management, ingredient price tracking, payroll, accounting, deliveries, and everything else needed to keep things running smoothly and headache-free.

The company earns the bulk of its revenue by charging fees on each transaction moving through its network. That’s a powerful growth engine when people are going out dining. But during a recession, when money is tight, growth is likely to slow for Toast, dragging down investor sentiment and, with it, the stock price.

Economic slowdowns are a risk Toast will always have to endure alongside intense competition. However, with a debt-free balance sheet and $1.4bn of cash & equivalents in the bank, the group appears to have ample financial flexibility to navigate the storm. That’s why if a stock market crash does materialise, I plan on buying more Toast shares for my portfolio.

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With this in mind, here are two stocks in my portfolio that I’ve got my eye on for different reasons. One because I’m worried about it due to tariffs and the other because I’m tempted to invest more money in it.

Is Toast toast?

The first one is Toast (NYSE: TOST), which admittedly isn’t in the S&P 500. But the stock had almost doubled since the start of 2023, pushing the market cap above $20bn. So it was starting to look like a future contender for the benchmark index.

However, it fell 9% today, taking its decline to 25% since November. I think today’s drop is understandable though.

The company provides point-of-sale payment systems and operates a cloud-based platform tailored for the restaurant industry, encompassing online orders, delivery, marketing, loyalty programmes, and more. 

Given Toast’s focus on the US market, the direct impact of tariffs may appear limited. However, tariffs on imported goods can lead to higher prices for packaging and food, which restaurants might not be able to pass on successfully to their customers. 

In a worst-case scenario, many restaurants could struggle badly or even be forced to close. This would negatively impact Toast because it generates a large proportion of its revenue from transaction fees, which are directly tied to sales processed through its system. 

Thing is unfortunate because the company has been doing really well. Last year, revenue jumped 28% to $5bn as it added 8,000 net locations to end the year with approximately 134,000. It generated $306m in free cash flow and achieved its first full year of profitability.

I don’t think the company is toast by any means, and I’m not selling my shares. But given the uncertainty with tariffs, I’m keeping the stock on a short leash.

Super-app Uber

With a market cap of $150bn, the second stock is most definitely in the S&P 500. That is Uber Technologies (NYSE: UBER).

The stock is up nearly 200% since the start of 2023, driven higher by Uber’s move into profitability. However, it fell 4.5% today, taking the stock to around $71 (the same level it was 14 months ago).

At this price, I think the long-term returns could be very attractive. That’s because the firm is building out adjacent growth avenues beyond its core ridesharing and food delivery businesses. These include advertising (both in-car and in-app) and train/plane ticket bookings.

Meanwhile, it ended 2024 with 171m regular monthly customers worldwide and over 30m Uber One subscription members. We’ve seen with Amazon Prime how successful such loyalty programmes can be at scale.

Now, Uber isn’t totally immune to Trump’s tariffs. Trade tensions could disrupt operations or affect local regulations, especially in countries that favour local competitors.

On balance though, I remain bullish here. Uber has just signed a deal with WeRide, which operates the largest robotaxi fleet in the UAE. So Uber’s platform is also well-placed to benefit from the rise of autonomous vehicles.

I plan to buy more shares at anywhere around $70.

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However, there are loads of smaller growth stocks that are largely flying under the radar. Here are two that I think are worth considering.

Sweetgreen

First up is Sweetgreen (NYSE: SG), which is a restaurant chain that serves salads. The stock’s up 111% since the start of 2024, but has fallen 46% from a high reached back in November.

Last year, Sweetgreen’s revenue increased 16% to $676.8m, with comparable store sales up 6%. It opened 25 net new restaurants, bringing the total to over 230 locations across America.

CEO Jonathan Neman said: “In 2025, we’re rolling out a new and improved loyalty program, introducing exciting new menu items, and strategically investing more in marketing to bring more people into our restaurants. By staying focused on delivering an exceptional experience, we’re setting Sweetgreen up to lead — and redefine — fast food for the future.”

One thing worth highlighting is the firm’s Infinite Kitchen automation technology. This robotic assembly line replaces human workers for key tasks like portioning, mixing, and plating ingredients. It produces salads 50% faster than humans can!

The main risk here is that the company isn’t yet profitable and reported a net loss of $90.4m last year. So that’s worth bearing in mind, as is the ever-present possibility of a food safety incident.

Looking ahead though, the company’s healthy meals and local sourcing of ingredients plays into a wellness trend that’s likely to grow stronger over the next decade and beyond.

Last year, Sweetgreen’s average sales per location were around $2.9m, in line with industry giants like Chipotle Mexican Grill. I think its investments in automation could give it a competitive advantage.

The stock’s trading at a reasonable 4x sales. With a small market-cap of $2.7bn and an untapped international opportunity, I think Sweetgreen has all the ingredients (pun intended) to be winning restaurant stock.

Toast

Sticking with the food theme, I’m going to highlight Toast (NYSE: TOST). I like to think of the company as the Shopify of restaurants, as it provides an all-in-one digital platform for managing orders, payments and inventory.

The stock’s up 36% over the past year, but remains around 39% below its 2021 IPO price.

In 2024, Toast’s revenue grew 28% to nearly $5bn and it recorded its first full year of profitability — a net profit of $19m versus a net loss of $246m in 2023. Its recurring gross profit stream jumped by 34%.

Meanwhile, it added a record 28,000 net locations, bringing the year-end total to around 134,000. And Toast is now partnered with over half of the Michelin-rated restaurants in the US!

One risk here is that the firm faces a fair bit of competition, especially on the hardware side from payments firms like Block-owned Square. The stock’s forward price-to-earnings ratio also looks quite high at 40.

Looking ahead to the next few years though, analysts have revenue and earnings growing by double digits. And Toast is confident that over the next decade it can serve “many multiples” of its current locations.

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There are a lot of factors at play, such as index concentration and the war in Ukraine. However, it seems that most investor concerns are concentrated on the risk of a US trade war with Canada, Mexico, and China.

Given that tariffs are expected to trigger short-term inflation in America, a pause in interest rate cuts by the Federal Reserve is increasingly likely. Even more so given that US inflation has already been on the rise since August 2024, from 2.5% to 3%.

Is a crash coming?

Could all these concerns trigger another stock market crash? Possibly. Although personally, I think a correction is far more likely. On average, the stock market tends to rise two out of every three years. And both 2023 and 2024 both delivered exceptional results. For reference, the S&P 500 jumped 55% while the Nasdaq 100 climbed 90% over this period.

However, whether a crash, correction, or continued upward momentum occurs later this year, my investment strategy hasn’t changed. Regardless of market conditions, I’m still laser-focused on finding top-notch stocks trading at bargain prices.

Where are the bargains?

With all eyes on tech giants like Nvidia and Meta Platforms, finding excellent value among large-cap tech stocks is likely going to be difficult, perhaps impossible. After all, if everyone’s looking for gold in the same place, most will find none.

Instead, my focus is on the smaller businesses that are seemingly flying under the radar. One position I’ve been steadily building up over the last few months is Toast (NYSE:TOST). The restaurant tech firm connects front-of-house to back-of-house operations, handling payments, orders, and payroll while managing staff, inventory and prices from a single platform.

By relieving the administrative headaches that restaurant operators must endure, Toast has already captured close to 15% of the US market, and international expansion’s now underway. Around 134,000 locations already rely on Toast’s ecosystem. And since the firm takes a small fee off each transaction, free cash flow generation is in abundance translating into a debt-free balance sheet.

Over the last five years, revenue growth has averaged just over 40% a year. Pairing that with a recent transition to profitability, the business appears to be firing on all cylinders. As for its valuation, on a price-to-sales basis, Toast’s trading at a ratio of around 4.1. That’s far more reasonable compared to Nvidia’s 23.4!

What could go wrong?

Toast’s revenue stream largely consists of fees from restaurant transactions. This cyclical exposure means that if US economic conditions deteriorate, Toast will likely suffer as fewer people eat out. Consequently, even at today’s seemingly reasonable valuation, the stock could suffer significant volatility in the short term.

It’s why I think drip-feeding capital over time is a more prudent approach in the current stock market environment.

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Obviously, that’s sad news for investors who are only just discovering this top-notch company. However, there will always be another stock that delivers Shopify-like returns. And I think I may have just found it.

In fact, my conviction on this idea is so strong that when I bought shares last week, I doubled my usual starting capital investment. So with that said, let’s talk about Toast (NYSE:TOST). 

What’s Toast?

Toast is a cloud-based, software-as-a-service platform that serves as the operating system of modern restaurants. On the surface, it looks like just another Point of Sale (POS) system. However, in addition to its payment processing capabilities, the firm’s technology connects front- and back-of-house operations.

Beyond the usual accepting of orders at the counter or tableside, Toast enables online ordering, QR code menu scanning, real-time menu changes, multiple location management, ingredient price tracking, menu costing, self-service kiosks, AI-powered sales analytics, loyalty schemes, seamless integration with third-party online platforms, gift cards, e-mail marketing, access to a network of on-demand delivery drivers, even direct access to financing through its banking partners.

For Shopify shareholders, a lot of these features should sound familiar as the platform offers a very similar equivalent product suite for the e-commerce space instead of restaurants.

The next Shopify?

There are a lot of POS solutions around today, even in the restaurant niche. So what makes Toast so special? A big part of its competitive moat boils down to its technology. Looking at customer reviews, rival solutions don’t seem to come close in terms of capabilities, extensiveness of features, and ease of use.

So it’s not surprising the company’s already captured 15% of the US market. But while the software brings customers in, it’s the gross payment volume (GPV) that drives Toast’s revenue stream. With a small fee charged on each transaction, 82% of sales come from its payment processing solutions – another similarity with Shopify.

Thanks to rapid location expansion from less than 30,000 in 2019 to 127,000 as of September, GPV’s been growing at a 40% annualised rate, reaching $126bn in 2023. In turn, that’s translated into 42% annualised revenue growth over the last five years. And to top things off, it’s just turned profitable.

Of course, no investment’s ever without risk. Fierce competition means management has to continuously innovate its technology to stay ahead of the curve. And its dependence on transaction volume to drive sales and profits means Toast’s sensitive to economic downturns.

However, with an already dominant position within a highly fragmented US market and the recent launch of international expansion to Canada and the UK, Toast has barely scratched the surface of its long-term 15 million global location market opportunity.

With a market-cap of just $22bn, I think Toast has enormous Shopify-like growth potential. That’s why I just bought it.

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The artificial intelligence (AI) revolution

AI is already shaping up to be the investing theme of the 2020s and possibly the most important technological innovation since the internet and smartphone.

We have the obvious early winners like Nvidia and Microsoft-backed OpenAI, which has just partnered with Apple to put ChatGPT into Siri. However, beyond this, I’m still unsure which platforms and applications will end up as the big AI winners.

This is where the first stock I bought this year — Taiwan Semiconductor Manufacturing Company (NYSE: TSM) — comes in. TSMC, as it’s known, is the world’s largest chipmaker.

If the AI revolution really has legs, then it’ll need mountains of microchips. That’s great news for TSMC, which makes most of them for customers like Nvidia, Apple, Amazon, and Advanced Micro Devices.

When I invested in early January, the stock was trading for just 15 times forecast earnings per share for 2024. It looked like a no-brainer AI buy to me.

However, the market quickly cottoned on and the stock is up 70% in just five months. It’s now trading at 28 times forecast earnings.

One risk here is the AI revolution itself. If it runs out of steam, then TSMC’s earnings growth would suffer.

That said, only a fraction of PCs and smartphones are AI-enabled today. So this technology could become a multi-decade boost for the firm, which I fully expect will join the $1trn club sooner rather than later.

High-yield dividend stocks

I’ve also been buying FTSE 100 stocks carrying ultra-high dividend yields, specifically HSBC and British American Tobacco. They’re offering eye-popping yields of 7.2% and 9.7%, respectively.

Both appear dirt cheap, trading at around seven times earnings. That’s cheaper than the FTSE 100 average and that of their global peers.

As always, there are risks here. Tobacco volumes are in long-term decline, casting doubt on whether British American Tobacco’s vaping and oral tobacco products can offset high-margin cigarette profits.

Meanwhile, Asia-focused HSBC is exposed to economic weakness and a slow-moving property crisis in China. The country is a bit of a wildcard.

Still, I found the prospect of those massive dividend yields too tempting to resist. I added both stocks to my ISA and SIPP.

A slice of Toast

Another stock that popped up in my portfolio in 2024 was Toast (NYSE: TOST). The firm operates a management platform for restaurants, handling supply management, payment processing, online orders, and more.

In its recent Q1 report, revenue surged 31% year on year to $1.08bn, with annual recurring revenue climbing 32% to $1.3bn.

While that’s positive, one risk is that Toast is still in growth mode, so isn’t focused squarely on profits right now. Its quarterly net loss was $83m.

However, it does expect to break even on an operating income basis by the end of 2024, which is encouraging. Healthy growth is forecast for the next few years.

Today, it has a 13% market share in US restaurants, with 112,000 locations in total. But it estimates its total addressable market is 22m worldwide, including pizza shops, cafes, bakeries, hotel restaurants, and more.

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