Should investors be preparing for a US stock market crash in 2025?

2025 has been quite a volatile year for the US stock market. But fears are on the rise that more volatility could be on the horizon, potentially even a full-blown market crash.

JPMorgan Chase CEO Jamie Dimon has warned of the potential for softening consumer spending on the back of renewed trade tensions between America and China. If the subsequent slower economic growth is paired with inflationary pressure from tariffs, it could open the door to stagflation.

With many US stocks, particularly those within the artificial intelligence (AI) technology space, trading at lofty valuations, the US market could be vulnerable to adverse economic developments. And that’s an opinion shared by several notable finance experts such as Albert Edwards and Michael Bury.

So what should investors be doing right now?

Keep calm and carry on

The concerns surrounding US stocks aren’t entirely unfounded. And the pressures only being increased by rising US Treasury yields. However, does that guarantee the stock market will crash in 2025? No.

This isn’t the first time experts have called for catastrophe. And most of the time they’ve been proven wrong. For example, in 2023, Burry sold off nearly all of his stocks. Anyone who followed in his footsteps missed out on phenomenal returns in 2024. And the same thing may happen again this time around.

The point here is that investors shouldn’t ignore warnings of a crash but use them as a jumping point for further research and due diligence rather than blindly following the crowd. After all, panic isn’t a strategy.

Beyond this, what can investors do to prepare? Ensuring a portfolio’s diversified and building a larger cash position can be lucrative decisions if the worst does come to pass. Why? Two reasons.

Diversified portfolios historically have performed better during market downturns as the risk is spread out across multiple businesses, industries, and geographies.
By having some dry powder, investors gain the opportunity to start snapping up top-notch stocks at tasty discounts.

Look beyond the US stock market

Another tactic investors can consider is buying shares in businesses with limited exposure to America’s economic climate. And in the UK, there are plenty of businesses that fit the description.

Take Rightmove (LSE:RMV) as an example. As the UK’s leading online property portal, the company has next-to-no exposure to what’s going on across the pond. Instead, its business model’s almost entirely UK-centric. And with the UK housing market slowly starting to heat up, growth has begun accelerating again.

In its latest trading update, management’s guided for 8-10% revenue growth, putting it ahead of 2024 levels. At the same time, underlying operating margins are on track to expand from an already impressive 66% to 70%. And pairing all this with continued interest rate cuts from the Bank of England, Rightmove appears primed to flourish in the coming years and beyond.

Does that make it a risk-free investment? Of course not. With its business ultimately driven by the UK housing market, slower-than-expected drops in mortgage rates could hamper growth. Similarly, weaker UK economic activity may further reduce home affordability, lowering demand for Rightmove’s platform.

Nevertheless, with US stocks potentially wobbling, exploring top-notch UK shares like Rightmove might not be a bad idea in 2025.

The post Should investors be preparing for a US stock market crash in 2025? appeared first on The Motley Fool UK.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.