History has shown that global stock markets tend to move in unison. When the financial crisis hit the US in 2008, it wasn’t long before UK markets felt the pinch.
But not every market correction is driven by the same factors. Certain industries have greater weighting in different regions, so some areas get hit harder than others.
For example, Japan relies largely on exporting vehicles, while America’s recent surge is driven by AI-related technology.
Here in the UK, our market is heavily focused on financial services and supported by defensive sectors like healthcare and energy. To some degree, this reduces its exposure to more risky, speculative industries like AI. This makes the FTSE 100 somewhat more resilient during milder corrections or market volatility.
Last week, the Nasdaq fell 1.9%, one of its sharpest tumbles since President Trump first announced trade tariffs in April. But what’s driving the dip, and will the Footsie suffer the same fate? I decided to seek the wisdom of industry experts.
Interconnected markets
Last month, Russ Mould at AJ Bell commented on the US regional bank issues that rattled markets. While there’s no direct evidence of similar UK banking sector problems yet, market sentiment often reacts impulsively, leading to temporary contagion effects
More recently, Morgan Stanley and Goldman Sachs CEOs warned of a probable 10%-15% market pullback in the US. A result of high valuations and investor exuberance, this could spill over into the UK.
Meanwhile, the Bank of England and IMF have also flagged rising risks of a sharp market correction. They point out the stretched valuations and geopolitical uncertainties that could provoke volatility in interconnected markets like the UK.
Long story short: yes, the UK is likely to take its fair share of the ripples if (and when) the US wobbles. So how can investors prepare?
Taking a defensive stance
While the UK is certainly not immune to global market jitters, it may be a little more resilient. A combination of overseas earnings and a weakening pound could boost returns for UK-listed companies in dollar terms, partly offsetting US market shocks.
What’s more, the UK’s post-election political stability and trade agreements have attracted investors seeking a ‘safer harbour’. Compared to what many perceive as uncertainty in US policy, this could soften negative contagion.
So now may be the time to consider defensive UK stocks.
Down 9% in a year and trading near a 52-week low, RELX (LSE: REL) may not immediately spark investor excitement. Despite its £62.3bn market-cap, it’s not exactly a household name in the UK. But historical performance has been impressive — between 2015 and 2025, it grew 230%, equating to annualised returns of 12.68% a year.
The company provides information-based analytics and decision tools, serving professional markets in science, legal, risk, and business sectors. Boring, I know, but that’s exactly what to look for in defensive stocks.
Plus, it has a strong balance sheet and a focus on recurring revenues, supporting consistent dividends. This adds appeal for income-focused investors seeking safety during turbulence.
There’s an ever-present regulatory risk related to data privacy and antitrust in various jurisdictions, which could result in non-compliance penalties. But overall, I think RELX is worth considering as a stabilising force in a diversified portfolio.
