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Global stock markets have had an incredible run since their April lows. Major indexes such as the S&P 500 and the FTSE 100 have flown to new all-time highs while some stocks like Palantir and Joby Aviation have risen more than 100%.
This level of enthusiasm for stocks has surprised a lot of people given that economic uncertainty remains high. And it begs the question – is it now only a matter of time until we see a stock market crash?
The truth about stock market crashes
Volatility in the stock market’s very common. But it’s not often that we see a full blown crash. This is generally defined as a drop of 20% in a short period of time. And these only tend to come around every five to 10 years.
According to Capital Group, on average they occur about every six years. It’s usually when something unexpected happens (eg Donald Trump slapping huge tariffs on the whole world).
Given that we had one in April, I’d be very surprised to see another in 2025. Two crashes in one year would be unusual.
We could see a pullback in 2025
I do think there’s a good chance we’ll see some volatility in the second half of 2025 though. It might be a 5% pullback, or it may be a 10% move lower (defined as a ‘market correction’).
I don’t know when it will occur. It could come soon or it could come later in the year. And I don’t know exactly what will cause it. It could be related to tariffs or it could be related to corporate earnings or something else.
One thing I do know however, conditions are ripe for a pullback. Right now, there’s a lot of froth in the market.
I’ll buy the dip
I’m not afraid of market volatility though. In fact, I’d welcome it. The reason I’d embrace it is that it would give me the opportunity to buy stocks at lower prices. That’s what I want to be doing as a long-term investor.
A decent market pullback could present me with some compelling opportunities. Whether it’s the opportunity to add to an existing holding at a great price, or buy a new stock at a low price, I’d be able to put some of my cash pile to work.
I’ll point out that there are lots of stocks I’d love to buy more of at lower prices. One example is international payments firm Wise (LSE: WISE). I’ve been buying this stock in recent months. And if it was to come down 10%, I’d snap up more to build my position.
To my mind, Wise is one of the best tech stocks on the London Stock Exchange (and worth considering at current levels). It’s founder-led, growing rapidly and, most importantly, very scalable.
Today, this company has a market-cap of just £13bn. If revenues can keep growing at 20-30% a year however, I see no reason why this couldn’t be a £30bn market-cap business in a few years.
Of course, payments is a competitive industry, so Wise is going to have to innovate to fend off rivals.
All things considered though, I reckon it has bags of potential. If we see a lower share prices due to stock market weakness, I’ll be buying more to top up my position.
