It's probably fair to say that many ASX investors might be starting to worry that the share market is heading for a rough patch. At the extreme ends, we could see a stock market correction, or even crash, in 2026. Now, to be clear, I'm not trying to scare anyone. I, nor anybody else, knows what the markets will do tomorrow, let alone next week or next month.
However, we can't skirt the fact that a severe energy shock, as the the world is currently experiencing, has the potential to be highly damaging to the global economy. The US-Iran war has resulted in the effective closure of the Strait of Hormuz. The Strait is a vital energy artery that, until a few weeks ago, allowed the transit of about a fifth of the world's energy supply chain. As most Australians would already be aware, this has sent energy costs soaring around the globe.
Long story short, the possibility of a stock market correction or crash looks more likely today than it did three weeks ago. At least in my view.
This might seem like a scary prospect. And it is. Stock market downturns can have serious implications for investors, particularly those at or approaching retirement.
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How to approach a potential 2026 stock market crash
However, even before the US-Iran war started, ASX investors should have been preparing for a crash at some point. As the long history of the stock market proves, periodic corrections or crashes are an inevitable part of investing. There is usually a catalyst , of course. But regardless of what that catalyst turns out to be, the question when it comes to the next crash is always 'when', not 'if'.
As such, I think all investors should be wargaming the prospect of a market downturn at the best of times. If you haven't, today is probably a good day to start.
That doesn't mean girding yourself to start selling shares if things get worse though. It is my firm belief that the ASX share portfolio you have when you expect the good times to roll should be the same portfolio that you have if you are bracing for a possible stock market crash. If you buy an ASX share, whether it be TechnologyOne Ltd (ASX: TNE) or Commonwealth Bank of Australia (ASX: CBA), you are buying an ownership stake in that company's future profits.
The future is a long time. So if you believe a company will be permanently damaged or even perish in the next recession or economic calamity, why would you own the shares in the first place? It would be the equivalent of buying a house on a floodplain.
If the market crashed tomorrow, I would not sell a single share in my portfolio. Instead, I would be scraping whatever money I had at my disposal together to buy more shares at a much cheaper price.
