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2026 started with a bullish run in the London stock market and investors asking whether the good times could keep rolling.
That seems a long time ago already, as the tragic war in the Middle East alongside broader geopolitical concerns have sent many investors scrambling to try and protect their portfolios.
Is a stock market crash coming – and what practical steps might an investor take now?
There are no crystal balls in the market
To answer the first question, nobody knows.
For sure the stock market will crash sooner or later. When that might happen, though, is pure conjecture.
Clearly there are reasons to fear it now. Beyond its human cost, the war also threatens to increase inflation, stretch supply chains, hurt investor confidence, and eat into company profits. That comes on top of existing stock market nerves about AI valuations.
However, things could turn out differently. A sudden resolution to the conflict could see shares rally. Meanwhile, in the short term at least, the war may have little or no impact on many businesses. It could also lead to higher profits for some firms, from oil majors to ship charterers.
I’m acting “as if”
Watching share prices slide can be unnerving, though. Some investors dump their shares, even at a loss, when that happens.
I understand that response psychologically, but as a long-term investor I try to avoid such kneejerk reactions. Unless the underlying investment case for a business has changed, I don’t want to sell shares just because they fall – even if that fall is dramatic.
But a stock market crash could present an opportunity. It could push down the share prices of some excellent businesses to attractive levels.
I would like to be ready for such a possibility. So I am spending time now to update my list of shares I would like to own if I can buy them at an attractive price.
For example, over the long run, Next (LSE: NXT) has been a strong stock market performer. It is up 34% over the past year and 67% over five years.
The past 20 years have seen the Next share price grow 739%.
Plus, someone who bought at that much lower price 20 years ago would now be yielding 16% on the FTSE 100 retailer.
At the right price, I would be happy to own Next in my portfolio. But it sells for 20 times earnings.
Arguably that is a fair price for this quality of business. Next is a profitable, proven operator that has successfully navigated evolving shopping trends over the course of decades.
Still, the price is too high for my tastes.
After all, Next faces risks including the potential for supply chain disruption I mentioned above. UK consumer confidence is low and I think current events could make it weaker, potentially hurting clothes spending.
So, for now, Next is one of the names I am adding to my watch list in case a market correction or crash suddenly brings its price down. It is far from the only share on that list at the moment!
