Will the stock market crash in 2022?


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Listening to the headlines, one could be forgiven for thinking that we are in the throes of a devastating stock market crash. In recent news, I see headlines proclaiming the “worst year for stock investors in a decade.”

Wait a minute. We invest for the long term and hope to buy stocks at the best possible price for years to come, right? Wouldn’t a fall make it one of the better years for stock market investors?

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I mean, if world food prices fell, we wouldn’t call it the worst year for gluttons in a decade. When it comes to stocks, I’m a glutton.

The UK stock market is doing very well anyway. At the time of writing, the FTSE100 fell just 1.4% over the past 12 months. So much for the “stock market rout” which I read on.

To be fair, some of the world’s stock markets have had a tough time. Specifically, these are the US markets. But I see a good reason for the difference.

Stock market differences

The United States is home to more pioneering high-tech companies than most countries. The economy, regulatory environment, and relatively low taxation all contribute to making the United States an attractive place for innovators to set up shop.

On this side of the pond, we are much more conservative. We don’t even have our own dedicated tech index, like the NASDAQ.

Instead, the FTSE 100 is filled with blue chip, mature companies that have been doing the same things for decades. But that’s good too.

A five-year comparison of the US and UK stock markets is revealing. Over this period, the FTSE 100 is down 5%. But despite the falls this year, the S&P500 still gained 51%. And the NASDAQ is up 73%.

Growth in the UK?

Perhaps the closest we have got to a growth index here in the UK, the FTSE250 a… uh, also dropped 5% in five years.

I might suggest that the Footsie didn’t crash just because it’s in a perpetual crash state anyway. So maybe the UK stock market won’t crash in 2022 because it’s already there.

What does this mean for investors? On the one hand, I think the variety of stock indexes on either side of the pond is great for us.

Investors in US equities should simply expect more volatility. There is a greater potential reward there, and so there must be more risk.

Low risk income

Don’t like risk? The FTSE 100 is home to plenty of stocks offering reliable long-term dividend income, although we leave out cyclical miners and oil companies benefiting from a short-term boost.

Imperial Marks offers a dividend yield of 8%, Khaki is on a potential return of 12% (including a special dividend), and M&G looks set to deliver 10%, to name just three.

So are we heading for another stock market crash in the UK? I think the odds are relatively low, given our perpetual crash state here. But if we don’t see any, I’ll be disappointed, because I’d like to buy more long-term dividend-paying stocks at even lower prices.


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