Could we see another stock market crash? I’m afraid we cannot rule it out. The coronavirus is yet to be contained. As anybody who has booked a Spanish holiday has discovered to their cost, it is popping up in countries that thought they had it beat.
The wave of fiscal and monetary stimulus that bailed out markets in March has been unable to stop the FTSE 100 slipping back towards 6,000. Until we get a vaccine, investors must to learn to live with Covid-19.
At the Motley Fool, we work hard to get this message out there: a stock market crash is not the end of the world. In fact, it is your opportunity to pick up top FTSE 100 companies at reduced prices. When investors panic and sell, they tend to dump good stocks along with the bad. If you can identify those good stocks and buy them at a discounted price, you can benefit by holding onto them for the long term, and wait for the recovery to kick in.
I’d buy bargain FTSE 100 shares
So if we do get a second stock market crash, that will be a great time to go shopping for shares. However, investors who hang around waiting for the perfect buying opportunity have a tendency to come unstuck.
The thing is, nobody can say when stock markets are going to crash. And when they do crash, nobody can say how far they will fall. It is impossible to predict the future in this way.
All you can do is buy shares after they have fallen, at the reduced price. If markets fall further, buy a few more. Over time, your wealth will build.
As the pandemic drags on, some companies could slip deeper into trouble. You would be have to be brave to buy the airlines right now, following the government’s quarantine U-turn. I would shun cruise operators, for the same reason.
Stock market crash 2: Be prepared
On the other hand, I think a full-scale second lockdown looks increasingly unlikely. The economy can’t stand it. Nor can the nation’s mental health. We will have to muddle through, wearing face masks if necessary. While I don’t see us rushing back to cinemas, open air activities such as theme parks could start to recover.
I think housebuilders such as Barratt Developments or Persimmon look tempting. People still need homes and the stamp duty holiday will drive demand. Big supermarkets like Tesco have shown themselves to be a key service, and growing online sales could offer a bulwark against Aldi and Lidl.
If you are looking for dividends, healthcare companies such as AstraZeneca and GlaxoSmithKline, and utilities such as National Grid or United Utilities Group could be your friends. Maybe even Centrica.
I would take advantage of the stock market crash to go shopping for shares, but I wouldn’t buy them randomly. Choose your targets wisely.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.