Is a stock market crash coming? Here’s what I’m doing now!

UK share prices are collapsing again as concerns over the global economy rise. This is what I’ll be doing if another stock market crash happens!

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

sdf

UK share prices are sliding again on Monday as concerns over the economic recovery worsen. Fears of a fresh stock market crash are rising as financial markets across the globe plummet.

Take the FTSE 100 for example. Britain’s blue-chip stock index slumped at the end of last week and this morning fell to six-week lows below 7,340 points.

What’s caused the carnage?

An escalating Covid-19 crisis in China has caused stock markets to slide again today. Mass testing in Beijing has been reintroduced and fears over fresh lockdowns are dominating stock markets today.

As Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, commented: “There is concern that prolonged lockdowns will hit employment and lead to a sharp slowdown in growth as well as sparking fresh shipping logjams and supply chain issues.”

Worries about how rocketing inflation will hit global growth are meanwhile also damaging market confidence. Speculation over how central banks could respond to these inflationary pressures is also damaging UK share prices. A string of harsh rate rises by the US Federal Reserve in particular could prove damaging for economic growth.

Is a stock market crash coming?

Trying to predict how stock markets will perform in the near-term is tough at the best of times.

However, the number of economic threats — and the fragility of market confidence — makes forecasting share price movements particularly difficult today. Though it’s my opinion that investors should certainly prepare themselves for a fresh stock market crash.

I’m certainly preparing myself for such an eventuality. Though I’m not selling the shares I own and running for the hills as some might be doing now.

No, instead I’m doing research on UK stocks that I’d like to buy if they slump in price. As someone who invests for the long term, I’ll use severe volatility in stock markets as a dip-buying opportunity.

This is a tactic I’ve used to great effect in the past. Tritax Big Box and Clipper Logistics, for example, have soared in price after I bought them following the 2020 stock market crash.

Thinking like Warren Buffett

There’s no guarantee that such dip-buying will definitely pay off, however. Broader economic, and company-specific, problems could emerge to actually drive a share price lower.

But there’s a wealth of evidence that shows how buying shares after market crashes can be an effective way for me to build my wealth.

Warren Buffett’s most famous piece of advice is to “be fearful when others are greedy and be greedy when others are fearful.” And he has famously made billions over the years from playing the stock market!

Over the long term, the average stock investor tends to enjoy an annual return of around 8%. So the possibility of more share market turbulence isn’t denting my investing appetite.

If the stock market crashes again I’ll be waiting to pounce on some bargain shares.

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.

Royston Wild owns Clipper Logistics and Tritax Big Box REIT. The Motley Fool UK has recommended Clipper Logistics and Tritax Big Box REIT. 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 Caucasian man making doubtful face at camera
Investing Articles

2 top UK stocks I still wouldn’t touch with a barge pole

Harvey Jones has his barge pole out and is using it to keep these risky UK stocks away from his…

Read more »

Close-up image depicting a woman in her 70s taking British bank notes from her colourful leather wallet.
Growth Shares

The Rolls-Royce share price could hit £10 if these 2 things happen

Jon Smith points out two key factors that will likely dictate if the Rolls-Royce share price can continue to push…

Read more »

Investing Articles

Will the stock market crash as war fears grow?

Harvey Jones says hanging around for a stock market crash is no way to pick FTSE 100 shares. What matters…

Read more »

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing Articles

Here’s one of the FTSE 250’s greatest bargain shares to consider!

This FTSE 250 share's risen 10% since the start of the year. Royston Wild gives the lowdown on why this…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

Should I sell Legal & General Group and buy even more Phoenix shares instead?

Harvey Jones is thrilled he bought Phoenix shares as the FTSE 100 insurer has done better than he hoped. He…

Read more »

Photo of a man going through financial problems
Investing Articles

This FTSE 250 stock has a stunning 10.8% yield! Time to consider buying?

Harvey Jones is dazzled by the amount of income on offer from this FTSE 250 stock, but not too dazzled…

Read more »

Young female hand showing five fingers.
Investing Articles

£10,000 invested in these 5 FTSE 100 shares in June 2020 would now be worth…

Our writer considers the best-performing shares on the FTSE 100 since the summer of 2020, and takes a closer look…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: June’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »