Will There Be a Stock Market Crash in Autumn 2022?

There is a storm brewing which could be as big as the Credit Crunch Crisis and more recently the pandemic, both of which caused huge falls in global stock markets.  They did then subsequently recover within a year, but investors still experienced the stress of large losses and then the relief of recovery.

Citi Bank has forecast inflation to hit 18.6% which is higher than the last oil crisis in 1973 and UK ‘bailout’ in 1975 when inflation then climbed to over 17% in the late 1970s.  Stock markets did not crash in the late 1970’s but did during the oil crisis of 1973/74.

That said, interest rates are much lower today than they were then, and inflation is already climbing with yet more pressure with coming interest rate increases, Putin potentially shutting off European gas supplies.  The energy price cap was £1,137 in January 2019 with the average annual bill at around £800.  Today the cap is £1,971, that’s nearly double what it was before the pandemic.  Energy firms and commentators are forecasting a new cap, to be announced on Friday 26^th August and effective from 1^st October at over £3,500.  Looking into next year, some are forecasting the next cap in January to £5,000 pa and £6,500 pa in April 2023.  That’s a staggering 6 X fold increase on the cap in just 4 years and an increase in the average bill of 8 X fold.

Our pockets will be squeezed, we will reduce our spending, companies will ‘go under’ and people will lose their jobs.  The property market will then also take a hit.  Eventually, inflation will fall back, markets will recover, and we expect another bust to boom period over the next 5 years.

Where to invest?

We are not at investment alert level ‘Code Red’ as we cannot call the market and can only make investment fund recommendations for you in line with your risk profile. 

• If you wish to ‘cash park’ and de-risk to a lower level, then know that lower risk investments will devalue with high inflation. 
• If you wish to maintain risk levels, then know that there is going to be volatility but then markets will recover.

We suggest if you are going to invest then consider ‘real’ assets rather than ‘speculative’ assets.  During Brexit and the pandemic lockdown, real assets performed relatively well.  You saw what happened to real assets such as property.  Consider:

• Property – both residential and commercial.
• Infrastructure, both new government and stocks in firms with other larger projects.  Even energy and telecoms are within our infrastructure.
• Private equity and hedge funds will also be looking for value opportunities during any recession which will then bounce back.

Above all, forget the standard 60% Equity, 40% Bond split and think more about having as wider, balanced portfolio as you can.  Diversify, move some away from traditional developed economy markets and look for global market exposure across all types of funds and emerging markets to spread your risk as widely as you can.  Small %s in many sectors is possibly safer than larger %s in developed markets and lower %s in global and emerging market sectors.

Will there be a Stock Market Crash in 2022?

There is a higher-than-normal risk, but we cannot call it, so we will not forecast, and we will not move to ‘Red Alert’ status, but we are spreading our funds as widely across sectors and the globe as much as we can for clients that wish to remain invested at current risk levels given the uncertainty.

If you wish to change your risk profile and funds, then please contact us.

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