FTSE 100 investors be prepared! The stock market could fall further

FTSE 100 investors suffered from a major sell-off on Monday. But Anna Sokolidou believes the market crash is not over yet. Here is what she would do right now.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

FTSE 100 investors have surely had a volatile time so far this year. There was the big crash in March and yesterday there was a small stock market crash too. But the Footsie could go much lower, I think. Here’s why.

Top reasons for another stock market crash 

To start with, the coronavirus-related tougher measures will delay the long-awaited economic recovery, I think. Although there won’t probably be a second lockdown like we had this spring, there will surely be more regulations. For example, bars, hotels, and restaurants will have closing time at 22:00 starting from Thursday. Clearly, this will be an additional blow for the hospitality industry. What’s more, everyone is recommended to work from home if there is such an opportunity. The fact that tighter measures are in place is also a risk to many other sectors of the economy. Airlines and cinemas will be the first to suffer, I believe.

Then, I assume there’ll be more volatility soon due to Brexit. It’s still a big question whether there’ll be a ‘deal’ or a ‘no-deal’ divorce from the EU. There are many issues the two sides still cannot agree on. So it looks like the UK will leave without a deal. Some well-established investment banks like Goldman Sachs think a hard Brexit will be even worse for the UK economy than the coronavirus lockdown. I don’t know for sure what the future holds for UK-EU relations, but I am more than sure that any bad news will lead to volatility.

US-China tensions are a great risk too. And so are the US elections, which are a major source of uncertainty as well. These last two things to worry about might seem to be irrelevant for FTSE 100 investors. However, that’s not the case, unfortunately. That’s because major stock market crashes in the UK were all somehow linked to the US economy. The most obvious examples are the dot-com bubble and the Great Recession of 2008–09. 

Here’s what I’d do as a FTSE 100 investor

Earlier on I wrote about the steps I’d take as a Footsie investor. But I find the most important measure one can take is holding as much spare cash as possible. A stock market crash is usually a great buying opportunity. Always remember that markets go up and down. I don’t worry that much when my portfolio holdings go down. After all, it’s a normal situation for an investor. But I find it really annoying not being able to take advantage of situations like this. That’s why it’s extremely important to have some cash available to invest.

I’d recommend FTSE 100 investors to stop worrying. Instead, think about the stock market recovery record. It’s really sound. This can be seen from the graph below.

FTSE 100 history

Source: Google Finance

But obviously, it’s much better to buy soon after a major stock market crash and not just ahead of it. 

FTSE 100 is an index, which means it’s just the market average. But it’s possible to consistently overperform it. We at The Motley Fool attempt to do just that with our investment ideas.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Anna Sokolidou has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Here’s how I’d target £496k in FTSE 100 shares and £19k of passive income in a Stocks & Shares ISA

I invest as much surplus cash as I can at the end of the month in my Stocks and Shares…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Is Rolls-Royce’s share price an irresistible bargain?

Is Rolls-Royce's share price the FTSE 100's greatest bargain today? Royston Wild explains why he would -- and wouldn't --…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is the Vodafone share price a wonderful bargain or a horrible value trap?

As the Vodafone share price continues to fall, is it now a stock to buy with a view to a…

Read more »

Hand of a mature man opening a safety deposit box.
Investing Articles

I’d buy 95,239 shares of this banking stock to generate £200 of monthly passive income

Muhammad Cheema takes a look at how Lloyds shares, with a dividend yield of 5.9%, can generate a healthy monthly…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Can FY results give the Antofagasta share price a long-term boost?

The Antofagasta share price has had a good five years. Now the company says it's set to enter a new…

Read more »

Person holding magnifying glass over important document, reading the small print
Dividend Shares

Can I make sustainable passive income from share buybacks?

Jon Smith notes the rise in share buybacks from FTSE 100 companies, but flags up why they aren't great for…

Read more »

Front view of a mixed-race couple walking past a shop window and looking in.
Investing Articles

After the Currys share price rockets, here are more potential UK takeover targets!

The Currys share price has surged 39% higher in response to news of a takeover bid. Which UK stocks could…

Read more »

Investing Articles

Down 25%, where will the British American Tobacco share price go next?

The British American Tobacco share price has taken a hit. But this Fool isn't deterred. He think's now could be…

Read more »