What are the odds on a second stock market crash? Opinions might differ on the likelihood of another meltdown on financial markets. But recent macroeconomic and geopolitical news flow suggests that the chances of another market crash are definitely rising. I’d use any pull-back in share indexes as an opportunity to buy dirt-cheap FTSE 100 stocks.
News about Covid-19 continues to dominate the headlines. The total number of worldwide cases has just burst through the 10m marker and is still climbing at an alarming rate. Waves of infections are sweeping through major emerging nations and the West isn’t out of the woods yet, either. Some US states like Texas have reimposed lockdown measures, and in the UK restrictions are being extended in some parts of the country, like Leicester.
But the coronavirus isn’t the only issue that’s making investors fearful. Tensions between the US and significant trade partners in Asia and Europe continue to heat up. The threat of a no-deal Brexit seems to be growing by the day. Long-running geopolitical anxieties flared up again on Monday with news that Iran has issued an arrest warrant for US President Donald Trump, too.
Get ready for the market crash
Given all this, it’s no surprise that concerns over a second stock market crash are accelerating. I for one reckon the chances of another financial market collapse are significant. Speaking as a share investor myself, though, the prospect of another crash doesn’t fill me with gloom. Instead I’m excited about the cheap FTSE 100 stocks that I’ll be able to buy in the aftermath.
Remember that stock market crashes are nothing new. Many have happened and there will be more to come whether that be several weeks, months, or years from now. Financial markets tend to plunge every seven to eight years. Yet history shows us that stock investors still have the opportunity to make great returns. Long-term investors can expect to make an annual average return of between 8% and 10%, data shows.
I’d buy FTSE 100 bargains!
A critical part of successful investing involves clever timing, in other words buying low and selling high. A second market crash in the weeks or months ahead, therefore, will provide stock investors with another chance to get in at rock-bottom levels.
There are already stacks of brilliant FTSE 100 shares trading for next to nothing following the recent crash. Britain’s colossal housing shortage means that the likes of Barratt Developments and Persimmon should generate exceptional profits through the next decade and beyond. The immense brand power and broad product range of Unilever and Reckitt Benckiser means that they can be expected to deliver meaty earnings growth, too. And growing data demand should supercharge business at Vodafone, too.
Another market crash would provide share pickers a chance to grab these FTSE 100 gems at even cheaper prices, too. And they are just a few of the bargains that investors will likely be able to pick up following another sell-off. So don’t waste the opportunity of a second stock market crash – you really could supercharge your investment returns by buying blue chip stocks at rock-bottom levels.
Royston Wild owns shares of Barratt Developments and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. 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.