Disaster averted! But a stock market crash isn’t off the cards yet
If you’ve been following financial news lately, you’ve probably seen alarming headlines about an ‘imminent’ stock market crash. It’s enough to make any beginner investor nervous.
But the thing is, predicting market crashes is like predicting precise weather patterns — everyone has an opinion, but nobody really knows for sure.
So let’s cut through the noise and talk about what might happen.
The bull case for 2026
Most mainstream Wall Street forecasters are cautiously optimistic about 2026. Bank of America predicts the S&P 500 will reach around 7,100 by year-end (a modest 3.7% gain), while some analysts such as Ed Yardeni see it climbing to 7,700 (a 12.5% rise). Morgan Stanley and JP Morgan both favour stocks over bonds, suggesting they expect continued gains rather than a collapse.
The reasoning is straightforward: corporate earnings remain healthy, unemployment is low and consumers are still spending money. As long as the economy doesn’t implode, stocks should keep climbing — just not as dramatically as 2025’s exceptional run.
The problem is, banks seem to always be optimistic — even right before a crash. But those with less ‘skin in the game’ are somewhat less convinced.
It’s not all sunshine and rainbows
Here’s where things get interesting. In a recent Reuters poll, 56% of strategists said a correction’s likely in the coming months. That’s not a crash but more like a dip of around 10%. Think of it as the market pausing to catch its breath before the next leg up.
Goldman Sachs CEO David Solomon put it bluntly: “It’s likely there’ll be a 10-20% drawdown in equity markets sometime in the next 12 to 24 months.” Mark Newton, technical strategist at Fundstrat Global Advisors, echoes this sentiment, forecasting a possible 15%-20% pullback with his S&P 500 target hitting 7,300 by year-end.
Neither of these are crash calls, but suggest that the big banks may be over optimistic.
So what’s the play?
A mild 10% correction is a minor event that doesn’t require drastic action. It could however, present some decent opportunities.
The industrial components distributor Diploma (LSE: DPLM) is a good example. It boasts exceptional 20% return on equity (ROE), recurring revenue from healthcare and industrial sectors, and a 15-year track record of 8% earnings growth. Yet at 5,685p, it trades 44% above intrinsic value and 40.6x forward earnings — more than double peer averages.
For value-focused investors, these eye-watering valuations present an insurmountable barrier, despite the company’s merit. A 10% correction to around 5,100p is still elevated but far more attractive, potentially justifying research for a small allocation in a diversified portfolio.
Admittedly, insider selling has raised eyebrows, with CEO Jonathan Thomson recently dumping £1.7m of his stock. This may just be a reaction to short-term overvaluation, but if it continues, it could irk investors, risking a price drop.
Final thoughts
For now, the immediate risk of an actual stock market crash looks limited. A short-term correction however, is quite possible — and should be viewed as an opportunity, not a risk.
In my opinion, Diplomaâs current insider selling doesnât deter me, as I believe the long-term outlook remains highly attractive. As such, I think itâs a compelling stock thatâs worth considering in 2026, especially if the price dips.
The post Disaster averted! But a stock market crash isn’t off the cards yet appeared first on The Motley Fool UK.
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Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Mark Hartley has positions in Diploma Plc. The Motley Fool UK has recommended Diploma 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.
