It’s not hard to imagine a stock market crash this summer, given all the flak thrown at investors lately.
Markets began the year in a downbeat mood after inflation, war in Ukraine and Chinese lockdowns hammered share prices in 2023. The all-conquering US S&P 500 fell almost 20%, its worst year since 2008. The FTSE 100 ended the year up slightly.
There’s still plenty to worry about, with inflation high and central bankers continuing to hike interest rates rather than cut them. The banking crisis and now the US debt ceiling stand-off have added to the uncertainty.
A tough time to invest
The FTSE 100 has retreated after hitting it’s all-time high 8,014.31 on 20 February, and trades at 7,627.20 this morning. It’s down 4.83%, which I’d call a dip rather than a crash.
Although I’d rather the market was booming, I wouldn’t be averse to a crash right now. I’ve recently transferred three legacy pensions into a self-invested personal pension (SIPP), and I’m looking to feed the cash into the market.
Summer of uncertainty
A summer crash would be a great opportunity to pick up my favourite FTSE 100 stocks at reduced prices, after which I’d sit back and hold them for the long term.
History shows that June is actually the worst month for investors. Traders go on holiday, private investors tune out and the subsequent thin trading volumes can make share prices volatile. Between 1996 to 2020, the FTSE 100 has dropped 1% on average in June. That’s marginally worse than January, when it dropped 0.9% on average. In September and November, also bad months, the index dropped 0.8% on average.
I’d treat these figures with caution. As ever, past performance is no guide to the future. There will be good Junes and bad Junes. Plus they only reflect the index performance as a whole, rather than individual FTSE 100 stocks, which I prefer to invest in. The calculations also exclude dividends.
I have learned from hard experience that trying to second-guess a major stock market movement such as a crash is a losing strategy. There are just too many variables. Even a supercomputer can’t calculate them all. Nor can AI. At least, not yet.
Waiting for a stock market crash is like waiting for a pot to boil, but with one key difference. I know the pot will boil at some point, but I’ve no idea whether the market will crash. It could rise instead, and all my favourite shares could suddenly be more expensive, and I’d be kicking myself.
Timing the stock market accurately is impossible. There’s no absolutely perfect time to invest. So instead of hanging around, I’m going to start feeding money into the market from this week. If there’s a dip, I’ll feed more in. And if shares do crash in June, I’ll go on a spree.
Whatever happens, I will leave my money invested for decades to give it plenty of time to compound and grow, whatever its starting point.
