The financial pages are packed with articles warning that we’re heading for a stock market crash. Of course they are. It’s October, after all.
This is often seen as the most volatile month, home to the Panic of 1907, the Wall Street Crash of 1929, Black Monday in 1987, and some of the sharpest falls during the 2008 financial crisis.
Plenty of people are warning that markets could buckle again, as tech stocks pour huge sums into AI and investors fret over whether they’ll get a return on all of this investment. Valuations look stretched, with the US S&P 500 trading at levels only seen before the dot-com bust. Debt is mounting across the globe and government borrowing costs are soaring. Recession signals are flashing, yet prices keep rising.
Buying the dip
Will it come to a head in October? I’ve got no idea. Predicting stock markets is impossible. Nobody knows what they’ll do from one day to the next. The only thing we can be sure of is that over the longer run, they rise. That’s why I keep buying shares.
I’m not assuming the market will collapse this October, but I am keeping some cash in my Self-Invested Personal Pension, just in case. On Sunday (28 September) I said the first stock I’d buy is Goodwin. It’s got an excellent past and bags of potential, but the shares look expensive with a price-to-earnings ratio of almost 40. Maybe a little too expensive to consider buying today.
London Stock Exchange Group on my buy list
Next, I’d top up my stake in London Stock Exchange Group (LSE: LSEG). Its shares soared after the financial crisis but are now down 20% over 12 months and 5% over five years. I’ve already taken a small position, and I’d like to buy more. However, the stock looks expensive with a P/E of 22.8. It’s also vulnerable if markets do crash. So I’d rather buy afterwards than before.
First-half results on 31 July belied its recent share price struggles, with adjusted earnings per share rising 20.1% to 208.9p. The board was confident enough to hike the interim dividend by 14.6% to 47p, and management launched a £1bn share buyback.
There’s scope for growth as it’s also working with Microsoft to build AI tools for banks and asset managers. Yet AI poses potential risks too. If it destroys jobs as feared and City headcounts fall, that could mean fewer terminals on desks and lower revenues.
Given what the London Stock Exchange Group does, it’s likely to take a beating in any wider market sell-off. That makes it tempting to buy if markets do slip in October.
FTSE 100 outsourcing group Bunzl is another recent stock purchase I’d like to top up at a lower price. All three are worth considering today, but they’d be even more tempting if markets crash, although only with a long-term view of at least five years.
I hope we don’t see a sell-off, but if it comes, I’m ready.
