Stock market crashes are notoriously difficult to predict. Some have got it miraculously right, such as the infamous Nouriel Roubini in 2008, but for the most part, predictions for the next major market crash are often shots in the dark with little evidence to back them up.
Talk of a new and steep decline coming up in 2021 has been plentiful. Many experts and commentators are suggesting the market rebound following 2020’s Covid-19 crash has been premature.
The UK’s primary shares index, the FTSE 100, has gained 27% since its low of 4993p in March 2020. It has also gained 15% since September.
So how likely is it that we will see another stock market crash in 2021?
Fighting back
Given the impact of the coronavirus in 2020, I think stock markets across the globe performed admirably in dealing with the fallout.
Looking back over the last 12 months, the Footsie has fallen around 12%. That is actually against the trend of several major stock indexes.
US indexes S&P 500 and the NASDAQ, for example, have gained 17% and 44% in the last year, despite the pandemic. The German DAX is up 4%.
The FTSE 100’s rebound since the autumn has coincided with the development of a number of vaccines. Future performance will depend on how the UK and other countries are able to implement their vaccine programmes. There is plenty of optimism around, particularly in the UK, where more than 12m people have received their first doses of the jab.
However, the emergence of new variants of the virus and concerns about the efficacy of the approved vaccines against these have dampened this optimism somewhat.
Is a stock market crash on the way?
It could well be the case that there is a market decline coming. I think there may be potential for some further Covid-19 vaccine complications, especially as further variants develop that may be less easily suppressed by any of our current vaccines.
With that in mind, the short-term outlook for the likes of the FTSE 100 and other stock markets may be affected over the next 12 months at least.
However, as my investment strategies are based on a long-term buy-and-hold tactic, my feeling is that even if there is another major stock market crash to come in 2021, I’m willing to hold my investments to weather the storm.
I firmly believe that by investing in well-structured, reputable UK companies in the FTSE 100 and FTSE 250 I will ultimately see the returns in five years, 10 years, and further down the line.
UK stocks have overcome difficult market conditions in the past to recover, most notably following the 2008 crash and the fallout from the Brexit referendum in 2016. I think they will do so again even if we see another crash this year.