The FTSE 100 is trading at two-week lows! Is this the start of a second stock market crash?
The Motley Fool
Published Jul 01, 2020 15:25
Updated Jul 01, 2020 15:40
The FTSE 100 is trading at two-week lows! Is this the start of a second stock market crash?
Is the FTSE 100 recovery starting to run out of steam? Investor confidence continues to swing wildly and so it’s nigh-on impossible to second guess what the blue-chip index will do next. Right now though, stock picker sentiment is on the wane and the FTSE 100 is retreating to its cheapest since June 15.
But what should existing and aspiring FTSE 100 investors do today? Is it time to sell up, lock the credit card away and head for the hills? Well first of all let’s look at why selling pressure has begun to rise again in recent sessions.
Fresh lockdowns around the corner? Despite the FTSE 100’s weakness of the past couple of weeks, the index remains a long way off its post-crash troughs. From multi-year nadirs below 5,000 points struck in mid-March, the Footsie trades some distance off these levels around the 6,200 marker.
The Footsie rocketed off the bottom after Covid-19 quarantine measures began being lifted in China and then extended to North America and Europe. More recently, though, signs of a second coronavirus wave have been detected in these regions. And this has seen authorities either slow the pace of lockdown easing or even reinstate barriers. It stands to reason that the FTSE 100 has started moving lower again. Fresh restrictions could devastate hopes of a sharp economic recovery.
The International Monetary Fund expects global GDP to contract a whopping 4.9% in 2020 because of earlier lockdown measures. This would represent the worst economic downturn since The Great Depression almost a century ago. No wonder share investors are becoming more jittery.
I’d still buy FTSE 100 stocks today Resurgent coronavirus infection numbers aren’t the only thing rattling investor nerves right now. Trade relations between the US and major world economies like China, Germany and Britain continue to stretch. They’re likely to keep doing so as part of President Trump’s reelection plan ahead of the November election too. Bickering over tariffs weighed on global growth long before the coronavirus outbreak. It threatens to choke off hopes of a V-shaped recovery as well.
Some might argue that these threats to global growth (and thus corporate profits) mean that individuals would be better off waiting on the sidelines than investing in shares today. It’s not a sentiment I agree with.
When stock markets crash, a natural response is to panic. No one likes to see the value of their shares plummet. It’s important to remember though, that you and I only lose money on our investments if we sell them before they can recover in price. Providing you’ve bought into high-quality companies in the first place, then it’s likely they’ll rebound and do so strongly.
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The key is to remain patient, and the data is there to back it up. Stock market crashes are nothing new and studies show that the average long-term investor still racks up annual returns of between 8% and 10%. So rather than retreat into your shell, I reckon now is the time to capitalise on the 2020’s stock market crash. There are many top-quality FTSE 100 shares trading at rock-bottom prices right now, shares that could make investors a fortune in the years ahead. So carry on investing, I say.
The post The FTSE 100 is trading at two-week lows! Is this the start of a second stock market crash? appeared first on The Motley Fool UK.
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Motley Fool UK 2020
First published on The Motley Fool
Written By: The Motley Fool
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