Is the stock market crash over? Investors are feeling more optimistic, with the FTSE 100 up 15% since crashing below 5,000 on 23 March.
Nobody can say for sure. All we know is that markets have fallen by around a quarter since Covid-19 struck, which gives you a great opportunity to pick up shares at bargain prices.
That’s why I’d consider investing £2k in a Stocks and Shares ISA today, or any other sum you have at your disposal. Don’t let the stock market crash put you off. In fact, it’s a good reason to buy.
Some investors do like to take a peek into the future, and AJ Bell investment director Russ Mould has drawn up a list of five signals that may point the way out of today’s stock market crash. Are brighter times ahead?
1. Covid-19 cases slow
The most obvious sign the stock market crash has run its course is a slowdown in the number of new coronavirus cases. This will give markets a chance to gauge the depth of the damage to corporate earnings and cash flows, and decide whether share price falls adequately reflect this.
Good news: In Covid-19-stricken Italy, Milan’s MIB-30 index has advanced 19% since bottoming on 12 March.
2. Doctor Copper gets over the stock market crash
Copper is seen as a bellwether of economic health, because its multiple uses make it an accurate gauge of manufacturing activity around the world.
Bad news: Copper price continues to fall.
3. Transport stocks are moving again
If businesses and consumers are buying again, suppliers will need to restock, and freight volumes will start to rise. When that happens, the stock market crash may reverse.
Mixed news: The Dow Jones Transportation index is up 17% from its low, but the US benchmark has dipped.
4. Junk bond prices are rising
When investors are feeling confident they’re keener to invest in high-yielding ‘junk bonds’, which drives up prices. Mould says you can track junk bond prices via the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), or the SPDR Bloomberg Barclays High Yield Bond ETF (JNK).
Bad news: Junk bond prices are still falling.
5. Sixth sense says stock market crash is over
Mould reckons the biggest buy signal in a stock market crash occurs when investors have totally capitulated, and aren’t even thinking about buying cheap stocks. In other words, the moment of absolute fear.
Bad news: My sixth sense says investors are still keen to buy.
The signals are mixed and second-guessing markets is a mug’s game anyway. Nobody can predict what’s going to happen next.
Personally, if I had £2k to spare, or any other sum, I’d take advantage of today’s stock market crash right now and load up my ISA allowance. History is my favourite indicator, and this shows share prices always recover, given time, and remain the best way of building your long-term wealth.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.