What might come first: a stock market crash or boom?
- ^IXIC
- WSE
The past few weeks have seen lots of investors fretting about a stock market crash.
US tech stocks have been struggling to maintain their valuations. That does not surprise me, frankly, given how demanding some of those valuations have been.
Still, it has led to a stock market correction in the tech-heavy NASDAQCompositeindex Stateside over the past several weeks. There has been concern that that could spread to other parts of the stock market.
Boom or bust?
Now, nobody knows what will happen next week in the stock market, let alone next year.
However, have the stock market crash fears been overdone?
On one hand, I do see a legitimate concern that the stock market could crash soon. Economic confidence is weak, consumers are tightening their belts and some valuations look loopy.
Then again, that has been true for much of the past several years and the stock market has marched on regardless.
The FTSE 100 is up 9% so far this year. Despite its recent turbulence, even the NASDAQ is up by the same amount so far in 2026.
That could mean that, when the next stock market crash does come, it will hit with a vengeance.
But another way of interpreting it is that the stock market’s resilience reflects ongoing investor confidence. If AI does deliver the benefits claimed for it – and I see that as a big if – then corporate profitability could soar.
Are we on the edge of a boom market?
That comparative market resilience we have seen in recent months makes me wonder whether shares could continue their upwards march.
Take the FTSE 100 as an example. It has hit new all-time highs this year (though is lower now). It continues to look like good value to me. On top of that, the 3.1% dividend yield is attractive.
But just because something looks undervalued does not mean that valuation will somehow self-correct.
In practice, it often takes a catalyst (or multiple catalysts) – an unexpectedly strong earnings statement or takeover bid, for example.
With the UK economy remaining lacklustre and consumer confidence looking weak, I do not see obvious catalysts for the stock market as a whole.
Here’s what I’m doing now
Looked at that way, I reckon we could see a stock market crash before a stock market boom. In reality, though, nobody knows – and as Warren Buffett says, the time to be greedy is when others are fearful.
Rather than trying to time the market, I am focussing on individual stocks.
Recently I added to my existing holding in Wise Group (LSE: WISE). With its £9bn market capitalisation, I reckon this UK tech stock may be undervalued not overvalued like some US peers.
