Here are 3 signs the stock market may crash in 2026, and what we can do about it
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Gold rising above $5,000 suggests investors may fear a stock market crash. Silver has reached over $100 an ounce again. I see a serious ‘flight to safety’ here, where investors are afraid that volatile assets could collapse.
Many buyers of precious metals may have sold government bonds as well. And that suggests a second loss of confidence.
Inflation remains stubborn and the US jobs outlook continues its weakness through 2025. The Federal Reserve will also replace its chairman this year. And markets fear the potential economic consequences of any major cuts in interest rates that may result. The weakening of the US dollar adds to weak confidence in cash-based investments.
Ultimately, no one could miss the AI boom. Giants are used in the construction of technology. But not many companies have a clear path to sustainable profitability. The power may be great. But until it can be measured, stock price estimates are difficult to justify.
What to do?
So, a potential tech stock bubble, growing economic and government uncertainty, and a massive flight to safety in precious metals is something most of us will likely see. But will the stock market really crash? Neither knows.
To turn a common saying on its head, I think many investors fail to see the trees for the wood. The overall stock market may be looking a little scary right now. But I can still find many cracking stocks at attractive valuations.
However, if we see a good chance of a stock market crash this year, what should we do? We can think of holding as much money as possible. Then use it to find depressed price stocks when they fall. You know, the exact opposite of what many did in the 2020 crash, where they panicked and sold instead.
A stock to consider
Another option to see us through uncertain times is to focus on relatively defensive stocks. And in the UK, I think Tesco (LSE: TSCO) should have strong consideration to that effect. Shares have risen nearly 40% over the past five years, indicating that defensive investors are already in place.
But it doesn’t look overvalued to me, with a forward price-to-earnings (P/E) ratio of 15.5. That might be more than I would expect for a long time, but not by much. However, I see it as a big risk now. And when renewed stock market optimism drives investors to riskier alternatives again, we may see Tesco share price weakness.
On the yield front, Tesco’s is not the biggest at 3.4% forecast right now. But it is compatible with FTSE 100 average, and it should be comfortably ahead of where long-term inflation is likely to pass. It is not the dream of an idle cashier. But in my book it’s just fine.
Long term value
Warren Buffett famously suggested “If you are not willing to own a stock for ten years, don’t even consider owning it for ten minutes.” And that is my final tip for investors considering Tesco shares… or any shares.
