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Will we see a stock market crash in August? Plenty of experts are warning about one. Analysts at Morgan Stanley see a 10% correction as possible, while Evercore thinks it could be nearer 15%. Deutsche Bank is also uneasy. Hedge fund manager Owen Lamont has dubbed August “panic season” and suggested investors should brace for a potential “epic financial disaster” over the next three months.
The Buffett indicator, a long-term valuation gauge, has soared to 207%, well above its historical comfort zone of 90% to 135%. That doesn’t guarantee a crash, but it does hint that valuations are stretched.
Personally, I gave up trying to call market moves years ago. There are too many variables. All I know is that at some point the market will fall. Given today’s levels, that’s not unlikely, although prices could keep rising before then. Like most investors, I can spot a crash only after it happens, so I prefer to keep a buy list ready. These two FTSE 100 growth shares are near the top. Both have a terrific track record, but they’re expensive, with price-to-earnings ratios typically around 30. I’d love to see that cut.
FTSE 100 winner: RELX
RELX (LSE: REL) may not be a household name, but it’s a true global operator with customers in over 180 countries. In 2024, adjusted operating profit climbed 10% to £3.2bn, with margins rising to 33.9% as management cut costs and boosted productivity.
On 24 July, RELX posted half-year results showing revenue up 7% to £4.74bn and adjusted operating profit up 9% to £1.65bn. The board hiked the interim dividend 7% to 19.5p. Management reaffirmed full-year guidance, citing “positive momentum” and strong growth in analytics and decision tools.
Despite the solid results, the share price has slipped 10% over the past month and is flat over 12, though it has more than doubled in five years. The P/E remains high but if a market pullback trims that, investors might consider buying.
Is Sage a wise choice?
My second pick is Sage Group (LSE: SGE), which develops accounting and payroll software for companies worldwide. Over the past year, the stock has climbed 16% and it’s up almost 55% over five years. It fell 6% in the last month, again, despite some decent results.
On 30 July, it reported Q3 revenue growth of 9% to £1.86bn, driven by strong demand for its Sage Business Cloud platform. North America rose 11% to £846m. Full-year guidance was maintained.
Cut-price buying opportunity
Both companies have enviable growth records but rich valuations. This means they have to keep delivering the goods, to match high investor expectations. Their recent results were pretty good, just not good enough to drive their shares higher.
Artificial intelligence is a potential risk, allowing customers to replicate some services in-house, although it might also help both firms cut costs and improve products. Tariffs are an issue too, as is the wider global economic slowdown.
Recent dips could tempt some investors, but a broader market sell-off would make the opportunity more compelling. I can’t say if we’ll get one, but I’ll be watching both of these like a hawk if we do.
