Stock market crash: my five biggest fears for 2022! – Motley Fool UK

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Cliff D’Arcy | Wednesday, 29th December, 2021
2021 has been an outstanding year for global investors, with asset prices soaring to new highs. On Tuesday afternoon, the US S&P 500 index just hit a peak of 4,807.02 points, surging by 28.7% over 12 months. Barring the meltdown of spring 2020, the past three years have been a one-way ride for US shares and global stock markets. But as prices relentlessly rise, so too do my worries about the next stock market crash. Here are five possible triggers for a collapse in 2022.
My top worry is Covid-19, the coronavirus that has ravaged our world for two years. We have endured the original virus plus five main variants (Alpha, Beta, Gamma, Delta and Omicron). That leaves plenty of letters of the Greek alphabet to name future variants. I hope that this tiny, self-replicating, mutating agent will become less harmful over time, as did the common cold. Otherwise, we could be in for another tough year — and perhaps another stock market crash?
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The ‘TINA’ theory says There Is No Alternative to buying stocks currently. After all, near-zero/ultra-low interest rates mean that cash and safe bonds offer meagre returns. Thus, one way to boost returns is to take full-on equity risk. However, I remember pundits spouting similar messages (“This time it’s different”) in 1999 and 2007. Those years were followed by two huge stock market crashes. Today, like Warren Buffett, I’m fearful when others are greedy. It’s only during the next collapse that I’ll be greedy when others are fearful.
Remarkably, over half of the S&P 500’s gain in the past year came from just five stocks. These are mega-cap tech giants Microsoft, Apple, Nvidia, Alphabet (Google) and Tesla. These superstar shares have lifted the US market to repeated records. But what happens when these tech titans fall from favour? Could the decline of, say, sky-high rated TSLA trigger a stock market crash? I worry that it might.
Thanks to rapidly rising inflation, the US Federal Reserve is tapering its bond purchases and will raise interest rates in 2022. In the UK, the Bank of England this month raised its base rate for the first time in three years. Steadily rising interest rates should eventually curb inflation, but could choke off next year’s recovery. With economic growth already slowing on both sides of the Atlantic, could slowing earnings growth trigger a stock market crash? Maybe.
Right now, there are 27 armed conflicts going on around the world. But I worry that three major geopolitical risks might trigger global instability in 2022-23. First, the West has unfinished business with Iran regarding the latter’s nuclear programme. Second, the China-Taiwan situation might boil over into armed conflict. Third, the same might happen between Russia and Ukraine, as we saw in 2014. I don’t see the first issue as too worrying, but the other two genuinely terrify me.
Finally, long experience has taught me not to fear stock market crashes. I’ll just keep doing what I do: buying lowly rated, high-yielding cheap UK stocks for the long term. If the market falls, at least I get my dividends. This strategy has served me well through five major market meltdowns since 1987!
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Cliffdarcy has no position in any of the shares mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Apple, and Microsoft. 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.

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