Most people will have responded to stock market falls by asking: what took them so long?
Almost every analyst has been predicting some kind of correction this summer. The only thing they didn’t predict is when, because nobody knows that, not even Alan Greenspan, former US Federal Reserve chairman.
Greenspan told Bloomberg this week: “The stock market has recovered so sharply for so long, you have to assume somewhere along the line we will get a significant correction.”
He wisely, if anti-climatically, added: “Where that is, I do not know.”
Nobody Knows!
Maybe it’s already here.
On Thursday, the Dow Jones Industrial Average sank 317 points, or 2%, its worst single-day drop since February.
As I write this on Friday, the FTSE 100 is down almost 1.4%. That’s its third consecutive session in the red.
Could this be the crash we have all been waiting for?
A World Of Worry
There are plenty of reasons for stock markets to fall. The Ukraine crisis is intensifying, as the US and Europe sharpen up their sanctions. The eurozone is sliding ever closer to deflation, and today’s manufacturing data disappointed (again). Argentina is in default. The IMF has been warning of a China bubble. The Middle East horrorshow is plunging new depths.
As we move closer to the 100th anniversary of the start of the First World War, columnists can’t help drawing terrifying parallels.
Call The Cavalry
So far, markets have shrugged off these threats, either believing these crises can all be contained, or that central bankers will step in to save shareholders at the last minute.
Which ignores the fact that the US cavalry, in the shape of the Federal Reserve’s easy money policy, is in a swift and determined retreat.
When US wages finally start rising, interest rates will follow.
Amid all the uncertainty lies one unimpeachable fact.
Heard
In May, the FTSE 100 hit a peak of 6866. Right now, it trades at a three-and-a-half month low of 6644, some 3.2% off its peak.
That isn’t a crash, yet.
But it still makes today a marginally more tempting to buy, say, a FTSE 100 tracker, as you are getting 3.2% more stock for your money.
And there could be more discounts to follow.
But the biggest bargains can be found in individual company stocks.
Big Names, Big Discounts
If you like buying stocks at bargain prices, today’s wobbles have tossed up a host of big names at low prices.
Barclays (LSE: BARC) has seen its share price has fall nearly 25% to 225p since January. A string of scandals and regulatory investigations, falling investment banking profits, and the wider economic uncertainty have all dented confidence, but today’s discount looks a great time to buy.
At 479p, oil major BP (LSE: BP) is down nearly 9% since late June, as its 20% stake in Kremlin-owned Russian oil company Rosneft leaves it more exposed to US and European sanctions than any other British company.
Two other FTSE 100 stalwarts, GlaxoSmithKline (LSE: GSK) and Tesco (LSE: TSCO), are down 16% and 30% respectively over the past year. Falling profits and the Chinese bribery scandal have torpedoed the Glaxo share price, while cash-strapped customers, cut-price German competition and a loss of strategic direction have sunk Tesco.
The FTSE 100 is falling, and could fall further still. But there’s no need to hang around, there are already plenty of bargains to be had.