Is all the hype about a 2023 stock market crash overdone?

Fears over the health of the banking sector have stoked fears of another 2008-style stock market crash. But this Fool says there’s reason to be cheerful.

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.

Silhouette of a bull standing on top of a landscape with the sun setting behind it

Image source: Getty Images

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.

Stock markets began 2023 with a bang. The S&P 500 had its best January in 22 years, while the FTSE 100 broke the 8,000-point barrier for the first time.

However, an unfolding banking crisis has once again raised the spectre of an impending stock market crash. So what am I doing?

Building a cash position

I have always been a firmer believer in maintaining some dry powder in order to take advantage of bouts of irrationality in the stock market.

Most investors fear volatility. I thrive on it. Just as stocks can overshoot to the upside, so they can to the downside too. However, if I have no cash on the side-lines ready to deploy, then I can’t take advantage and buy my favourite stocks.

Take Glencore and Anglo American. Both stocks have crashed 20%+ in just six weeks. Yet their long-term growth story is still very much intact, in my opinion. That’s why I snapped up both shares recently, even though there’s a risk they could fall further.

Retail investors remain bullish

A recent survey of over 1,700 retail investors by Finimize highlight that many remain unfazed by recent stock market volatility. Three key headlines stood out for me:

  • 64% are planning to invest between $5K-$50K into the markets in the next 12 months
  • 68% think the global stock market will be higher a year from now
  • Apple, Microsoft and Nvidia were cited as the top three stocks to buy over the next 12 months

There are undoubtedly reasons to be cheery. For a start, we look to be getting close to the peak in interest rates. The latest 25 basis point increase by the Bank of England is nowhere near as aggressive as previous hikes.

The Office for Budget Responsibility recently revised up its estimates, predicting the UK economy would avoid a recession. Then there was a surprise uptick in retail sales of 1.2% in February.

Falling inflation

Clear evidence is beginning to emerge that inflation is set to fall throughout 2023.  Tumbling oil and gas prices could soon be reflected in consumers’ fuel bills, which could fall to around £2,000 by the summer.

Falling inflation will mean central banks are able to cut interest rates. If this indeed plays out, the cost-of-living crisis could be in the rear-view mirror by the end of the year. If this turns out to be the case that would boost consumer spending and, with it, economic growth.

Of course, nothing is certain when it comes to predicting the future. However, the stock market is forward-looking and will not be waiting for definite proof that a turnaround is materialising before beginning to march higher.

Therefore, I’m seeing this present bout of stock market volatility as my friend. A long-term investing horizon can help me weather short-term turbulence and build my wealth over time.

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.

Andrew Mackie has positions in Glencore and Anglo American. The Motley Fool UK has recommended Apple, Microsoft, Nvidia, and Tesla. 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

Happy young female stock-picker in a cafe
Investing Articles

No savings at 25? I’d start by investing £3k in these 3 red-hot FTSE 100 shares

Harvey Jones thinks these three FTSE 100 stocks would be a great way to kickstart a portfolio of UK shares.…

Read more »

Young Black woman using a debit card at an ATM to withdraw money
Investing Articles

Up 35% from this year’s low! Here’s where I think Lloyds shares are headed in H2 of 2024

My Lloyds shares are already doing well this year but that’s not guaranteed to continue. What factors could turn the…

Read more »

Investing Articles

Approaching £5, is there still growth ahead for the Rolls-Royce share price?

The Rolls-Royce share price has been flying in the last year. But is there more growth ahead or should investors…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

Could Raspberry Pi be a growth share to buy and hold?

Our writer explains why he thinks a newly-listed UK growth share could have a bright future -- and considers whether…

Read more »

A pastel colored growing graph with rising rocket.
Market Movers

The FTSE 100 jumps after the Bank of England meeting. Here’s what’s next

Jon Smith runs over the takeaways from the Bank of England meeting today and flags up which FTSE 100 stocks…

Read more »

Middle-aged white male courier delivering boxes to young black lady
Investing Articles

How I’d start investing in great value UK shares with £10,000 today

Harvey Jones can see a heap of UK shares he'd like to add to an ISA today. Many combine low…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Why did the YouGov share price just crash 37%?

The YouGov share price has been weak for a while. But that's nothing compared to what happened after this profit…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

YouGov shares collapse 37%! What’s going on with this AIM stock?

Our writer takes a look at why YouGov shares fell dramatically today and assesses whether this might be a chance…

Read more »