The FTSE 100 defies the US stock market crash

On Thursday, the S&P 500 came within 0.1% of a full-on stock market crash. Meanwhile, the UK’s FTSE 100 index stays steady and still looks too cheap to me.

Graph Falling Down in Front Of United Kingdom Flag

Image source: Getty Images

As I write late on Friday afternoon, it’s been yet another brutal week for global stock markets. After five weeks of falls, the S&P 500 index came within 0.1% of a full-blown stock market crash.

A whisker away from a US stock market crash

On Thursday, the main US stock index fell as low as 3,858.87 points, almost a fifth (-19.9%) down from its 3 January record high of 4,818.62 points. But the index then pulled back from the brink, avoiding the 20% drop that begins a full-on stock market crash.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

For me, a 19.9% decline is so close to 20% that I’m calling a US stock market crash on Thursday afternoon. What’s 0.1%, right? But stock prices have since rebounded, pulling the market back from the brink. As I write, the S&P 500 has leapt back above the 4,000 level to trade at 4,005.26 points. That’s 146.39 points (3.8%) above yesterday’s intra-day low.

Meanwhile, the FTSE 100 stands firm

The past 12 to 18 months have been a great time to be an old-school value investor like me. As formerly go-go growth stocks collapsed (highly valued US tech stocks in particular), old-fashioned value stocks have surged — or held their value, at least. As a result, there has been nothing approaching a stock market crash here in the UK. As proof, here’s how the blue-chip FTSE 100 index has performed over six different periods:

Five days-0.2%
One month-2.4%
Year to date0.2%
Six months0.7%
One year6.3%
Five years-0.9%

Looking at the above table, I see no signs of a stock market crash. To me, it seems that UK shares have been steady — though unexciting — during 2022. Furthermore, the Footsie is actually 6.3% ahead over the past year, excluding dividends. Adding in cash dividends of nearly 4% takes the index’s total yearly return to around 10%. This makes the FTSE 100 the best-performing major stock market index over the past 12 months. Yay!

The FTSE 100 still looks cheap to me

Since 31 December 2021, the S&P 500 index has lost close to a sixth (-15.7%) of its value, wiping out trillions of dollars of wealth. For me, this fall was well overdue, given how high stock valuations climbed during 2020/21’s trading frenzy. And with US interest rates heading upwards, I felt strongly that a stock market crash was coming this year.

Though US stocks have dived in value, I don’t see the S&P 500 as offering compelling value yet. However, I remain a big fan of the FTSE 100, which still looks too cheap to me. Likewise, I’m attracted to Footsie shares for their defensive properties — especially during this US stock market crash.

By my reckoning, the FTSE 100 trades on a price-to earnings ratio of around 11. This translates into an earnings yield of 9.1% a year. In comparison, the S&P 500 offers a trailing earnings yield of just 4.4%. Also, the Footsie’s dividend yield is around 4% a year — almost 2.7 times the 1.5% cash yield of the S&P 500. And that’s why I still favour buying cheap, high-yielding FTSE 100 shares over just about anything else!

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

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

Passive income text with pin graph chart on business table
Investing Articles

3 ‘no-brainer’ passive income stocks to fight 9% inflation

With prices rising (and the value of cash savings eroding), Paul Summers picks out three stocks he'd buy for passive…

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

5.2% dividend yields! Should I buy this cheap FTSE 100 share?

This FTSE 100 dividend share has risen in price recently. Yet at current levels it still looks extremely cheap on…

Read more »

Burst your bubble thumbtack and balloon background
Investing Articles

How high could the Woodbois share price go?

Jon Smith admits that there seems to be more room to run for the Woodbois share price, but explains why…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

2 penny stocks to buy and hold until 2032

I'm searching for the best penny stocks to buy and own for the next 10 years. I think the following…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

Here’s how I’d spend £3,000 on UK dividend shares right now

There are many reasons to consider dividend shares today, including soaring inflation. Our writer explores two top picks that he’d…

Read more »

Social media and digital online concept, woman using smartphone
Investing Articles

Apple stock: Buffett is long, Burry is short. What should I do?

Our author thinks about whether following Warren Buffet into Apple stock might be a good addition to his portfolio –…

Read more »

Close-up of British bank notes
Investing Articles

5 ‘no-brainer’ dividend shares to buy today

Is there an easy way to narrow down the list of FTSE 100 dividend shares? I try one approach, with…

Read more »

Close-up of British bank notes
Investing Articles

£5,000 to invest? 2 dividend-paying penny stocks I’d hold to 2030

I think these high-yielding penny stocks could help cushion the impact of high inflation on my returns. Here's why I'd…

Read more »