If the US suffers a stock market crash in 2026, I see little chance the UK could escape. But that might give us some tasty buying opportunities.
The combination of sky-high AI share prices and a weakening US economy does make me nervous. It looks like only 181,000 jobs were added in 2025, not close to the predicted 584,000. And far from than 1.4 million jobs added in 2024.
With trade tariffs hurting American businesses, and with unemployment still up at 4.3%, the chances of a recession appear real. It could be a dangerous combination, but it could create investing opportunities.
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If you build it, will they come?
At least the big AI leader, Nvidia, is in profit. Whoever wins or loses at the sharp end, Nvidia sells its chips and gets its cash.
But look at Tesla, which sometimes seems to be driven by little more than Elon Musk’s nebulous ambitions. If there was a price-to-dreams ratio, Tesla’s might be attractive. But a forecast price-to-earnings (P/E) of close to 300? We don’t have much that’s tangible to back it up yet.
What about all those companies jumping on the AI bandwagon with little idea how they’re ever going to make any money? A lot of them appear to be just pumping as much cash as they can into building AI infrastructure and hoping. And they can’t all make it big.
In recent weeks, some analysts have even predicted OpenAI — the maker of ChatGPT, which kicked off the whole craze — could go bust in 2027.
Get out from underneath?
If a building is collapsing, it’s best not to be in it, right? Perhaps I’m being a Chicken Little here, and the sky isn’t falling. And yes, there’s a good chance the US stock market won’t crash — and the UK won’t follow.
But my investing byword these days is… safety. I’m steering clear of high-valued tech stocks right now.
I’ve always like the UK insurance sector, and I currently hold Aviva (LSE: AV.) shares — in a diversified ISA based on safety. It’s been through its ups and downs. But insurance shares have never given me the kind of vertigo we can have inflicted on us by a tech-stock boom and bust.
Aviva pays me cash, now, in the forms of dividends. They can fluctuate a bit, but I reckon I see long-term dependability in the sector. I think investors should consider Aviva.
Aviva’s nature brings risk. Risk is its actual business after all — or at least part of it. And if the next sector squeeze hits the dividend yield — forecast at 5.6% — the shares could head down. But it looks to me like a decent long-term cash cow, and I think I’ll always have a stake in insurance.
UK stocks still look cheap
I do see a significant chance of a US-led stock market crash this year. But over here in the UK, many stocks trade on relatively low valuations. So I’d expect less pain on the London market.
I hope to pick up some tech bargains cheap should there be a collapse. Meanwhile, I’ll hold lower-risk dividend stocks and take the cash. I see plenty of good ones out there.
