It feels faintly ridiculous to talk about a stock market crash right now. February was a storming month for the FTSE 100, which finished 6.6% higher. The index seemed to take an age to break through 9,000, then 10,000. Suddenly it’s within touching distance of 11,000. So why am I worrying about everything going wrong?
Today’s world doesn’t scream stability. War still rages in Ukraine. China is flexing its muscles. The US is projecting power in the Middle East. Western economies are sluggish and voters are drawn to political extremes.
Then there’s artificial intelligence — the great unknown. Will it deliver the productivity boom investors expect? Or will it destroy swathes of jobs and prove the biggest capital sink in history?
AI uncertainty is unsettling sector after sector. In February, it was the turn of UK data and analytics stocks such as RELX, Sage, and London Stock Exchange Group. Traditionally seen as some of the safest and best UK growth stocks of all, they’ve been all over the place in recent weeks.
Which makes the FTSE 100’s recent strength all the more curious. Perhaps investors are rotating away from pricey US tech into old school dividend heroes. That suits me. My SIPP is full of them. Or perhaps this is what late-cycle markets look like. One last burst of exuberance before reality bites. That won’t suit me as much.
There are always reasons to predict a crash. At the same time, there are always reasons for markets to grind higher. And they do, most of the time. Investors who sit in cash waiting for the perfect moment usually miss out. Alarmists have been forecasting an imminent collapse for yonks. In that time, patient investors have built serious wealth.
I have my strategy all ready, in case we do get a crash. I buy stocks for the long term, and won’t sell any of them. But I always keep a little cash to hand and will use that to buy Barclays (LSE: BARC) shares.
The FTSE 100 bank has been top of my shopping list for weeks. The only thing stopping me piling in today is its recent run. The shares are up 52% over one year and 185% over two. That’s tremendous, but the bank would have to go flat out to maintain that momentum.
Full-year results on 10 February were strong. Pre-tax profit rose 13% to £9.1bn, prompting management to lift performance targets. The bank also announced a fresh £1bn share buyback and plans to return £15bn to shareholders over the next two years.
If a broader sell-off dragged Barclays down with everything else, I’d be delighted to top up at a discount. That said, the valuation isn’t demanding today. The shares trade on just 10.8 times earnings.
