Every time we get a rally, people start speculating about the next stock market crash. So with the FTSE 100 powering past 9,000, and global markets climbing too, it’s no surprise the worriers are warning of trouble in August.
Reuters reports that “big investors” fear a repeat of last year’s August rout, sparked by oil price swings, Middle East tensions and possible new tariffs. Markets are “complacent”. “Stocks, bonds and currencies vulnerable,” it said.
I’ve got two thoughts on that. First, those big investors might be right. Trading’s generally thin in August. Oil, war, tariffs, any of those could spoil the mood. Markets have been having fun, maybe too much of it.
Share price volatility
Second, yes, the market could absolutely wobble in August. Just like it did last year. Except I don’t remember last year’s crash. Not just because I’m getting older and more forgetful – although I am – but because it clearly didn’t matter that much.
I’m sure I did what I always do, which is buy more of my favourite shares at a lower price. I love a dip. The bigger the dip, the more I enjoy filling my Self-Invested Personal Pension.
I do remember 2000, 2008, and the 2020 pandemic slump. But the rest? They all blur together. None of them trouble me now.
One of my best buys
We had a market meltdown this year, when Donald Trump launched his Liberation Day tariffs on 2 April. I picked my moment to buy International Consolidated Airlines Group (LSE: IAG), which looked cheap after the sell-off. I’m glad I did. The shares are up 49% since.
IAG as it’s known has seen its share price rise130% over one year, and a thumping 222% over two years. This is largely a belated recovery from the pandemic, when its planes were grounded and debts soared.
Today (1 August), the British Airways owner released a strong set of half-year results. Revenue rose 8% to €15.9bn, while operating profit before exceptionals jumped 43.5% to €1.88bn. Travel demand is “robust”.
Margins improved, net debt fell to €5.46bn, and leverage dropped too. Iberia did especially well, while Vueling dipped slightly. The outlook remains confident.
Yes, risks remain. Travel is a discretionary spend. A recession would hurt. Tariffs could hit transatlantic demand. If fuel prices spike, costs rise. But with a price-to-earnings ratio of just 7.9, I think IAG still looks good value.
The trailing yield is 1.99%. Not huge, but I expect it to grow steadily. If shares do dip this month, this will be high on my watchlist, just like in April.
Forecasts and forgotten fears
I’m enjoying the recent run but I’m not scared of a summer slide. Long-term investors should welcome it as a chance to buy on the cheap.
I have some cash ready to invest, but I don’t let market noise dictate when I use it. I buy when I see a strong opportunity. IAG was a clear one.
Nobody can predict what markets will do. Big investors get it wrong. So do small ones. I don’t try anymore. There are simply too many moving parts.
We might not even get that crash. Nobody knows.
But what I’ve learned over the years is that market dips pass. Use them while they last.
