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The chatter about a stock market crash has been deafening. A host of experts have been warning about ‘a big one’ — potentially the worst since the financial crisis or the dotcom crash of 2000.
This happens every October. It’s a volatile time, and both the Wall Street crash of 1929 and Black Monday in 1987 hit this month. Yet as I’m writing (29 October), the FTSE 100‘s just hit another all-time high, as the S&P 500 did yesterday. Japan’s flying too, while emerging markets are enjoying their best run in 15 years.
The FTSE 100 is flying
Many are still worried by the potential bubble in artificial intelligence (AI), with Microsoft and Apple now joining the $4trn market-cap club and Nvidia charging towards $5trn. Rapid growth among these giants only fuels today’s nervousness, but I don’t think it matches the speculative chaos of the late 1990s.
The dotcom parallels are tempting, but they’re overblown. Back then, start-ups thrived on borrowed cash and hope. Today’s AI hyperscalers such as Meta, Amazon and Alphabet are established businesses generating vast profits. There are questions over whether they’ll get a return on their $400bn a year investment and the trend towards cross-holdings, but the potential’s also huge.
I was a little shaken by the bubble talk and sold a fifth of my S&P 500 tracker a month ago. Big mistake. At The Motley Fool, we argue against timing markets. Just accept the volatility, and stay invested for the longer run. On the plus side, I now have some cash at my disposal, and I’m looking to load up on individual FTSE 100 stocks (I’m mostly done with boring old trackers anyway).
HSBC shares look good value
HSBC Holdings (LSE: HSBA) leaps out at me. Its shares have had a stellar run, up 52% over the past year and 230% over five years. Yet they still look good value with a price-to-earnings ratio of just over 11. That’s well below the FTSE 100 average of 18.
Yesterday (28 October), it reported that Q3 pre-tax profits fell 14% to $7.3bn, hit by a $1.1bn legal charge, but grew 3% after “excluding notable items”.
The bank’s pausing some share buybacks for three quarters to rebuild capital, which is a shame. Yet it still has a trailing yield of 4.8%, and that’s forecast to hit 5.2% next year. Given the bank’s China focus, HSBC may get a further boost if Washington and Beijing strike a trade deal. Investors might consider buying, provided they take a long-term view and can look past short-term volatility.
Level-headed investing
Investors really need to tune out all the noise about a potential stock market crash. AI’s such a radical innovation, we’ve no idea what it will do in practice. Yes, a sell-off’s possible, but we don’t know when it will come, or what the impact will be.
History shows that with a long-term view, equities beat almost every other asset class, and it’s best to simply stay invested rather than jump in and out depending on what’s in the news.
No more selling for me. I’m only buying now. There are just too many FTSE 100 opportunities to ignore.
