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The news is full of dire warnings about an upcoming stock market crash, enough to make investors sell everything and head for the hills. Parallels with the dotcom collapse of 2000 and the Wall Street Crash of 1929 abound.
Some point to an artificial intelligence (AI) bubble and the huge valuations of tech titans such as Nvidia. The march of big tech has pushed the S&P 500 price-to-earnings (P/E) ratio past 40 for only the second time in history. Worryingly, the first was 1999, during the dotcom boom. Throw in fears over the $4.5trn US shadow-banking system, rising government debt and trade tariffs, and it all sounds apocalyptic.
I sold my S&P 500 tracker…
Yet investors are still buying. On Monday, the S&P 500 rose 1.07% to 6,735.13. It makes no sense, except that markets rarely do. Nobody can second-guess them. There are too many variables, and the shorter the timeframe, the harder they are to call. Over five, 10 or 20 years they typically outperform almost every asset class. But over one week, month or year, nobody can say what they’ll do.
Despite knowing that, on 21 August, I sold about a fifth of my US tracker, the Vanguard S&P 500 UCITS ETF. Poor move? Maybe. It’s up 4.1% since.
In my defence, there was logic. My Self-Invested Personal Pension (SIPP), set up in 2023, was overloaded with that fund, so I wanted more balance. I’ve also done really well from picking FTSE 100 shares, five of which have more than doubled in two years while the tracker rose 30%. Also, I wanted cash ready for bargains in what I expected to be a volatile autumn.
…then bought London Stock Exchange Group
I don’t like leaving money sitting out of the stock market so I’ve already put some of that to work, by purchasing FTSE 100 data and analytics specialist London Stock Exchange Group (LSE: LSEG). In contrast to the S&P 500, it’s had a tough year, falling almost 25%. Crucially, it’s now cheaper. For years it traded on a P/E above 30. Now it’s nearer 23.
Yet I think it’s long-term prospects remain strong. On 13 October the group announced a new phase of its partnership with Microsoft to extend its ‘AI Everywhere’ strategy.
Latest results, published on 31 July, showed total income up 6.8% to £4.49bn and adjusted earnings per share up 20.1% to 208.9p. The board also announced a £1bn share buyback programme and hiked the interim dividend 14.6% to 47p per share.
It’s not without risks. Competition in data and analytics is intense, and if we do get a crash and City firms respond by cutting jobs, this could reduce the number of London Stock Exchange Group terminals on traders’ desks, hitting revenues. Yet I think with a long-term view, the shares are worth considering today.
I can see other bargains across the FTSE 100, which trades on a P/E of just 18. That’s less than half the S&P 500. If markets do plunge, they’ll look even cheaper. And I still have some cash left to buy more.
