What sentiment is telling us about the outlook for global equities

“Stock market crashes” was the highest trending investment phrase among UK users of social media over the first two weeks of January. This may seem surprising given that equity markets began the year continuing the strong returns delivered in 2025 by shrugging off a series of tumultuous events around the world, from the US capture of the President of Venezuela, through the protests in Iran, to the announcement that the Justice Department is investigating Federal Reserve Chair Jeremy Powell. 

This sentiment is also out of step with professional investors and commentators, among whom there is unusual commonality over a positive outlook for global equities for the year ahead. The reasons for this bullish view include monetary and fiscal loosening, decent economic growth and inflation neither being too hot nor too cold.

Yet “stock market crashes” is not a recent topic for debate as it has dominated social media since the start of last year. Given that social media is now such a central source of news, information and opinions for so many people, it has become a possible bellwether indicator of investor behaviour and sentiment. It is therefore important to consider what is driving this focus on a potential stock market crash.

One driver is economic uncertainty and geopolitical turbulence. On social media, there are fears expressed about a recession and regional conflicts escalating globally. The reasons behind these economic worries that are discussed on social media include AI taking away people’s jobs, tariffs and the impact of geopolitics on the oil price. 

Another factor are valuations, especially among the US mega caps, and the market volatility over the past year, including after “Liberation Day” on 2 April 2025. Social media has also been a driver of retail investors seeking to taking advantage of the market volatility, with “buy the dip” going viral after stock markets tumbled following President Trump’s tariff announcement last April.

What is our view? The global economy is in reasonable shape. Expectations for growth are still in the low to mid-single digits, which, while unspectacular, is also not unhelpful, and inflation seems to have a lid on it. 

The danger of consensus is that there is a likelihood it is already in the price of equities. It is important, therefore, to consider the possible risks of the general expectations going wrong.

We continue to watch for signs that tariffs are impacting global trade. Thus far, there is nothing too disturbing, but tariff revenues are undoubtedly being raised and so someone must be paying them. It looks for now that it is the corporate sector taking a haircut on profitability rather than consumers being expected to fund these tariffs, but can businesses be expected to take on these additional costs in perpetuity or will they start to be passed on to the public? In a consumption-driven economy, too much pressure on consumers will be felt economy wide.

Political vacillations will remain headline grabbers. While the US approaches mid-term elections in 2026 and Europeans should expect plenty of political noise through this year, it is a good opportunity to remind ourselves that as much as politics can fill the news and social media, causing market volatility in the short term, generally the longer-term impact on markets is modest.

There are two ways to mitigate these risks – avoid expensive assets and through diversification. After a strong 2025 for equity markets, the debate around valuations is more nuanced than a year ago. While the US remains expensive, most other markets are no longer cheap but they are also not expensive and we believe are at levels that justify allocations which are greater than would be attained through a naïve market capitalisation approach.

As we have written before, it is perfectly reasonable to be positive on AI’s prospects without adhering to the perceived wisdom that the companies leading the charge today have sustainable valuations. The Magnificent 7 are priced very richly on once in a generation levels of profitability; a heady mix that, through the lens of history, we see typically does not end well for investors.

We favour a diversified approach to investing in recognition of its usefulness in managing risks, such as expectations not being met, over the long term. For example, our current allocation to the US is significantly lower than a market capitalisation weighted approach. True diversification goes beyond simply adding funds; it requires blending investments across asset classes, styles, regions and return drivers. 

The trending investment themes highlighted at the start of this article demonstrate that social media may be noisy but it is also a valuable early warning system for investor sentiment. It can inform advisers about the stories their clients are reading online and help to guide them to stay focused on their long-term goals.