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Could a stock market crash be just around the corner? Given the FTSE 100‘s just reached new highs above 9,400 points, this may seem a ludicrous question to some.
But in the uncertain economic and geopolitical climate, anything is possible. And there are some alarming indicators that deserve attention.
According to Investment Association data, global retail investors pulled £2bn out of share-based funds in August. This was the largest outflow on record, which the association attributed to
- “Inflationary pressures and weakening expectations of interest rate cuts“.
- “Continued uncertainty surrounding the longer-term impact of global trade tariffs“.
- “Concerns over elevated equity valuations“.
The FTSE 100’s stride to record peaks, and strong gains on other indexes such as the S&P 500, would have done little to ease concerns over stock valuations either.
What next?
Against this backdrop, it pays for investors to be prepared. But in my opinion, there’s certainly no reason to sell up and head for the hills until things become clearer.
The truth is that stock markets are remarkable in their ability to defy gravity. UK share prices may remain especially resilient too, given the cheap valuations of London-listed stocks some believe already price in the worst of investors’ concerns.
Economic and conditions are never totally calm. Today’s no exception. It doesn’t mean that a share market crash is coming this month, year, perhaps even over the next decade.
Taking action
As I said however, it can pay to make plans in case of a market correction. Some possible steps to consider include reviewing one’s asset allocation, reducing exposure to expensive shares, and making a list of stocks to buy if markets do drop.
As a keen bargain hunter, I’ve been creating a list of shares to buy. While the past doesn’t always repeat itself, history shows that stock markets always bounce back strongly from crises. By buying after a heavy fall, I could make a tasty long-term profit for my portfolio.
Sage Group‘s (LSE:SGE) a share I’ve been looking at recently. Its fallen 14% in value since the start of 2025, yet its forward price-to-earnings (P/E) ratio still stands at 22.9 times.
That’s substantially above the broader FTSE 100′s level of 12.5 times, so Sage’s shares are going for more money than I want to pay. A market correction could sort this out.
As a company that provides accounting and payroll software to businesses, profits are highly sensitive to any economic downturns. But the long-term outlook’s robust, and that’s what I’m interested in.
Companies across the globe continue to rapidly digitalise their operations, providing Sage with excellent sales opportunities. It’s also having enormous success in the field of artificial intelligence (AI), which could be significant — chief executive Steve Hare reckons AI will “change the nature” of the accounting industry.
Stock market corrections can be unsettling for investors, but share prices have a habit of recovering over time. And if the worst does happen, eagle-eyed individuals can make the most of any turbulence by buying top stocks at bargain-basement prices.
