Where am I sheltering from this stock market crash?

While share prices were soaring last year, almost every market pundit was bullish (positive) on the outlook for 2022. However, as this year has progressed and global stock prices have plunged, I’ve seen a huge increase in the number of bearish (gloomy) articles about equities. And, in the US at least, we’re already in the midst of a full-blown stock market crash.

The US is having a full-on stock market crash

As I write, only US stocks are currently in an actual bear market, which is where prices fall at least a fifth from a previous high. For the record, here’s how seven major market indexes have performed since the good old days of 2021/early 2022. I have sorted this table from largest to smallest percentage fall.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Country/Region Stock Index 52-week high Current level Change Change
US Nasdaq Composite 16,212.23 10,798.35 -5,413.88 -33.4%
US S&P 500 4,818.62 3,674.84 -1,143.78 -23.7%
World FTSE All-World Index 500.97 388.53 -112.44 -22.4%
US Dow Jones Industrial Average 36,952.65 29,888.78 -7,063.87 -19.1%
Europe STOXX Europe 600 495.46 409.07 -86.39 -17.4%
Japan Nikkei 225 30,795.78 26,246.31 -4,549.47 -14.8%
UK FTSE 100 7,687.27 7,151.82 -535.45 -7.0%
Prices as at 2pm on Tuesday, 21 June 2022

As you can see, the tech-heavy Nasdaq Composite index is the worst performer in my table, having lost a third of its value since its 22 November 2021 high. In second place is the US blue-chip S&P 500, having lost nearly a quarter of its value.

Taking third place is the FTSE All-World Index (-22.4%), which has been dragged down largely by the US stock market crash. Things are a little better in Europe and Japan, where shares have fallen between 14.8% and 17.4% from 2021/22 peaks.

The FTSE 100 has been a shelter in this storm

The stand-out star among major stock markets this calendar year has been the UK’s FTSE 100 index. The Footsie has declined only 7% since its 2022 peak on 10 February. One reason for this index’s resilience is it is packed with value shares trading on low valuations. Also, the FTSE 100 is heavily weighted to so-called ‘old economy’ stocks, including energy shares that have soared this year.

As it happens, this year has unfolded exactly as I predicted it would. In the second half of 2021, I repeatedly warned that US stock valuations were priced for perfection, so I expected them to fall steeply in 2022. Also, I repeatedly argued that the FTSE 100 and many of its constituent stocks were very undervalued, both relatively and geographically. As a result, my family portfolio stopped investing in US stocks in late 2022 and, instead, we used our cash to buy cheap UK shares.

I’m still keen on cheap UK shares

At present, the FTSE 100 trades on a forecast price-to-earnings ratio of around 13.9, for an earnings yield of 7.2%. It also offers a forward dividend yield of nearly 3.8% a year — more than double the S&P 500’s yearly cash yield of 1.8%. Currently, I worry about the war in Ukraine, soaring consumer prices, rising interest rates, and the risk of a global recession. Yet despite this, I will continue to buy cheap UK shares for their higher dividend income and potential capital gains!