As shares slump, is another stock market crash coming?

Love him or loathe him, Robert Kiyosaki, author of Richard Dad, Poor Dad has predicted a massive stock market crash in October. He’s far from alone in thinking a crash is coming. There could well be another major crash at some point. But trying to pinpoint when it will be seems foolish (and not in a good way). What we can say with certainty is that markets go up and down. And there has been a lot for investors to fret about recently.

The US debt ceiling issue has been pushed back to December but is still there creating the potential, however unlikely, for a US default. A government shutdown is more likely, as happened under the Obama administration. Then there’s sharply rising energy prices, shipping costs and delays, a lack of lorry drivers, the end of furlough and Universal Credit increase in the UK, the threat of inflation, and a potential property crash in China. Anything else unexpected, or even a continued worsening of these trends, could set off the powder keg.

Shares struggle

With all this going on, and autumn not historically being a particularly strong time for shares, it’s perhaps little wonder the stock market has slumped. For once it’s not just the “19th century” FTSE 100, as Baillie Gifford’s James Anderson called it, that has struggled but also the tech-heavy Nasdaq in the US as well.

But as Warren Buffett has said in the past, buy when others are fearful. So is this the time to listen to the Sage of Omaha? I certainly think so. Evidence shows that investors that try to second-guess the market and sell their shares to wait for a crash, often miss out on gains. To know when something in the future will happen is near impossible. Given the speed with which markets recover from most crashes, being in cash has an opportunity cost. That’s not my opinion. It’s been worked out by people far cleverer than me.

What to do if a stock market crash looms?

So with that in mind, I think it’s worth listening to Buffett. Who knows, investors may get used to these challenges and share prices will reflect the uncertainty. Now could in fact be a buying opportunity and the stock market might not crash.

I’ve been adding to my holdings in Somero Enterprises as I think it combines great growth potential with income. To my eyes, it looks like a fantastic share to add to my portfolio.

We may even see a Santa Rally if we’re lucky. That’s when shares increase in the run up to Christmas. There was a strong Santa Rally in 2019, although that followed a decisive election result here in the UK, which won’t be repeated this year.

Overall, my plan is to keep dripping in my investments every month and have a watchlist of shares ready to buy – especially if their prices drop on the back of any investor uncertainty. Yes, a stock market crash is inevitable, but I don’t believe it shouldn’t dictate how I invest. Correctly timing the market is too difficult. Buying solid companies and holding them has worked for some of the best investors ever. If it works for them, I’m sure on a much smaller scale it can continue to work for me.

Andy Ross owns shares in Somero Enterprises, Inc. The Motley Fool UK has recommended Somero Enterprises, Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.