Over the past few months, I’ve noticed increasingly bearish sentiment in the news regarding global markets. On several occasions, analysts have highlighted specific factors that could prompt a sharp stock market crash.
While some of this is the usual fearmongering, I’ve identified a few factors that warrant closer inspection. Rather than just speculation, they’re based on observable trends in valuations, bond markets, and investor behaviour.
Understanding them helps me stay calm when headlines turn negative. But what exactly are these warning signs, and how can I position my portfolio to weather a potential storm?
Three crash triggers to watch
First, there’s the AI-driven valuation bubble. Tech giants leading the artificial intelligence rally now trade at multiples similar to that of the dot-com era. Even if AI proves transformative, history suggests prices can overshoot fundamentals before correcting sharply.
Second, rising bond yields are creating pressure. The US 30-year yield remains above 5%, and as the 10-year approaches that level, equities look less attractive relative to safer government debt.
Third, leverage is building again. US margin debt hit about $1.5trn in June 2026, meaning more investors are borrowing to buy shares. If sentiment sours, forced selling could amplify losses.
So, with these risks in mind, what can a long-term investor actually do?
Building resilience in a volatile market
When volatility rises, I focus on three simple steps: keep some cash aside, avoid panic selling, and hold defensive shares that continue to profit through downturns. Defensive companies typically operate in essential sectors like utilities, healthcare, or consumer staples, where demand is less sensitive to economic cycles.
Yet a few outliers still fit the mold, and Schroders (LSE:SDR) is one example I’ve been studying.
The shares are up 43% year to date, yet the price-to-earnings growth (PEG) ratio sits around 0.14, suggesting the stock may still offer value relative to its growth prospects. The asset manager has paid dividends for 27 consecutive years and maintains a healthy balance sheet, with a market capitalisation of about £9.1bn.
However, no share is without risk. Schroders faces industry-wide fee pressure, and its performance depends on asset flows and market conditions. Any significant downturn in global markets could still affect its ability to maintain that dividend track record.
Still, as a healthy company with manageable debt and an excellent track record, its potential to bolster a portfolio can’t be discounted.
Staying informed, staying invested
In summary, three factors strike me as potential crash triggers:
- Stretched AI valuations
- Rising bond yields
- Elevated leverage
By keeping cash reserves, sticking to a plan, and considering resilient companies like Schroders, it’s possible to reduce the impact of any downturn. The key is not to try predicting the exact timing of a crash, but to build a portfolio that can endure it. After all, the best time to review your strategy is before the storm hits, not during it.
Markets will always have uncertainties, but preparation turns fear into opportunity. That’s the mindset I try to keep whenever I check my portfolio or read the latest market news. Understanding how to manage these risks is essential to avoid panic selling at the worst time.
Investors who prepare now may find themselves better positioned to capitalise when others are forced to sell. Taking action today could make all the difference tomorrow.
Should you invest £5,000 in Schroders Plc right now?
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Mark Hartley does not hold any positions in the companies mentioned.
