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A stock market crash may be coming. Why? The ratings look high. The conflict in Iran may go on and on. Analysts predicted $ 160 per barrel of oil, which will prevent inflation. All the while, countless billions are being poured into artificial intelligence with little return on investment — unless you include the stock prices of tech companies threatened by AI.
That’s what people say, anyway. And it’s true that, for the above reasons, the markets look more fragile than they have in maybe years. But guess what? I’m not worried.
Get greedy
In the 2020s so far, there have been three periods of extreme pessimism in stocks and shares not including the current volatility. I’m referring to March 2020 during the pandemic, October 2022 when a certain Mrs Truss compares to a wilting vegetable, and April 2025 when a certain blonde head of state talks a lot about taxation.
You know what’s funny? Those were three of the best buying opportunities in recent years. Many stocks were sold at low prices. Even the slow growing ones FTSE 100 had many stocks double or triple in value in a short period of time.
What is Warren Buffett’s quote again? “Be afraid when others are greedy and greedy when others are afraid.” The best strategy when the chips are down – as history tells us – is to keep buying. And conservative investors may wish to keep a small portion of their assets in cash to take advantage of any dips.
With all that said, this is one of those things that is easier in theory than in practice. I remember being very worried about my dwindling savings when Covid threatened to destroy the world economy in 2020. And a market crash can have serious consequences such as closing down companies or losing jobs too.
Cheap donations?
One stock I added to my watch list recently International Consolidated Airlines (LSE: IAG) – the airline group that controls British Airways, Iberia and Vueling. Although my exposure to the same stocks has prevented me from buying at the moment, this may have to change if the share price drops significantly.
Why? Because the cancellation of many flights due to bad conditions in the Middle East has reduced the price of shares by 22% in a few weeks. The price-to-earnings (P/E) ratio has fallen to 6.2 while the FTSE 100 average is around 18. If you look at other stocks with low single-digit P/Es from the past few years, you’ll find many of them have risen since then.
There are no guarantees, of course. Holiday bookings have already fallen since the start of the Iran crisis. Earnings may decline in the coming years and that low P/E may seem reasonable.
But none of us can predict a stock market crash ahead of time. That’s why I prepare for both positive and negative outcomes, and that means keeping an eye on potential stocks like IAG that could offer above-average market returns for years to come.
