In the world of finance, terms like “crash” and “correction” often get tossed around with alarming frequency. But what do these terms actually mean, and how do they impact your investments? Last week, many voices were raised in distress, but let’s set the record straight: the stock market didn’t crash.
To be precise, a market crash is defined as a decline of 20% or more over a short period. Conversely, a correction indicates a decline of about 10%. The FTSE 100, while it did slip by 5.74%, fell short of qualifying as either a crash or a correction. The primary driver for this dip was the escalating conflict in Iran, which understandably sent ripples through the markets, but we haven’t reached panic mode just yet.
Despite the fact that the FTSE 100’s recent downturn doesn’t amount to a crash, it does remind investors of the uncertainties that lie ahead. What should you, as an investor, do in times like these? Panic is a common reaction, but at The Motley Fool, we advocate for an entirely different approach.
First and foremost, don’t panic. Trying to second-guess the market only leads to poor decision-making, which often includes selling off your investments at a loss. If you choose to sell in a moment of fear, you’re effectively converting a temporary paper loss into a real one, which can be especially painful for long-term investors.
Instead, we encourage you to remain calm and collected. Look at your portfolio with a long-term perspective. If you have spare cash at your disposal, consider investing it in fundamentally strong companies whose stock prices have temporarily dipped. It takes a certain level of courage to remain stoic when external events like war grab the headlines, but historical data shows that even the most significant downturns are followed by recoveries. The market has an amazing tendency to bounce back.
However, it’s crucial to maintain a realistic outlook. If you require access to your funds in the short term—say, for a home deposit—investing in stocks may not be the best choice. Ideally, only invest money that you won’t need for at least five years, as this time frame allows for market volatility to smooth out and long-term trends to take precedence.
While the FTSE 100 is grappling with modest dipping, many individual stocks have faced far steeper declines. The stocks of several major firms—such as British Airways’ parent company, International Consolidated Airlines Group, housebuilders like Persimmon and Barratt Redrow, consumer goods giant Reckitt, and engineer Weir Group—have plummeted by around 14% within just a week’s time. Precious metals miner Fresnillo, which had been riding a strong wave, saw its shares drop by 17%, indicating a clear entrance into correction territory.
However, the news coming from these firms impacts their stock prices. Not every company’s stock decline can be attributed solely to the geopolitical climate. For example, Persimmon felt the pinch even before the Iran situation escalated. In uncertain times, companies like this often struggle as consumer confidence tends to plummet, leading to hesitance in making significant purchases like homes.
Currently, there’s also the looming risk of rising interest rates. If oil prices continue to climb and inflate consumer prices, the Bank of England may delay cutting rates—or worse, decide to increase them. This shift could create more pressure on the housing market, further squeezing demand.
Despite these risks, Persimmon appears to be trading at a relatively fair price, with a price-to-earnings ratio of about 14.3. The current dip has pushed its trailing dividend yield to an attractive 4.6%. However, it’s essential to consider the landscape since Brexit in 2016 has created significant challenges for housebuilders. Although Persimmon’s stocks are up 12% over the past year, they remain down nearly 55% over the past five years, showcasing a tough road ahead.
Should the Iran conflict continue and interest rates remain elevated, there is a possibility sales and profits could take another hit. Nevertheless, patient investors with a long-term focus may find opportunity in stocks like Persimmon. As for the stock market movements, whether we’re on the brink of a full-blown crash is uncertain. For those watching diligently, signs of more attractive bargains on the FTSE 100 may be emerging.
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Harvey Jones holds positions in International Consolidated Airlines Group. The Motley Fool UK has recommended Barratt Redrow, Fresnillo Plc, Persimmon Plc, Reckitt Benckiser Group Plc, and Weir Group Plc. The views expressed in this article are those of the author and may differ from official recommendations offered in our subscription services.
Motley Fool UK 2026
