It’s been a tough year or so for investors. Red hot inflation has caused global turmoil. And with a Covid-19 hangover and the tragic war in Ukraine also weighing down on sentiment, it’s no surprise people are fearing a stock market crash.
Despite these fears, I’m staying calm. With the threat of markets tumbling in the months ahead, here’s what I’d do should the market plunge.
The story so far
Before we delve into what I’m doing, let’s start by taking a look at what’s been going on recently.
As mentioned, the reason markets have suffered this year is a result of the macro economy. Inflation has hit 40-year highs in both the UK and the US, jumping above single figures in the UK for July. And while the FTSE 100 is down nearly 3% year to date, the S&P 500 has been as low as $3,636, signifying a 23% year-to-date loss.
Despite these losses, markets made a small rebound from July following the news that US month-on-month inflation fell between June and July. Clearly, investors were beginning to regain confidence.
However, with dire predictions for inflation rates being released by the likes of Goldman Sachs and Citi, it seems the months ahead could be rocky. While Citi warned that UK inflation could reach 18%, stating that the UK energy price cap could reach nearly £6,000 by April 2023, Goldman also recently predicted inflation could peak to as high as 22% should gas prices continue to soar. There’s no doubt this would see a crippling downturn in the stock market.
Remembering my goal
So, with the threat of a market crash on the horizon, what would I do?
First of all, I’d remember how I invest. And that’s for the long term. Within the stock market there are many different types of investors, be it day traders or hedge funds. But as a Fool, I purchase stocks with the aim of achieving some healthy returns in the long run.
What this essentially means is that the turbulence we’re experiencing in the market right now shouldn’t scare me into selling my positions. Volatility is inevitable. And therefore, I need to remember that if I’m patient, my long-term plan of building wealth should bear fruit.
Grasping opportunities
With this said, this doesn’t mean that I should steer clear of the markets. And in fact, what I’d do is the opposite!
A stock market crash presents a great opportunity for me to grab some bargain companies with strong fundamentals. And should stocks fall further, I have a list of companies I’d look to add to my portfolio. This includes the likes of companies such as BT and Lloyds, who have already seen their share prices suffer this year.
Whether a stock market crash occurs in the near future is unknown. And there’s no telling to what extent inflation can continue to rise. However, with my long-term outlook and a keen eye for undervalued investment opportunities, I’m not panicking any time soon.