How likely is a stock market crash in 2024? Good question.
So far, 2024 has been defined by positive developments here on our ASX share market. Sure, the S&P/ASX 200 Index (ASX: XJO)'s year-to-date gain of 2.10% doesn't look too impressive.
However, when you consider that the ASX 200 has risen by almost 15% since the beginning of November last year, it looks pretty darn good. And when you factor in the plethora of new record highs the ASX 200 has notched up over 2024 so far, investors arguably don't have a lot to complain about.
But new all-time highs often spook some of the more anxious investors out there. After all, there have been plenty of stock market crashes that have followed new all-time highs. Investors with long memories might still remember the new high of over 6,700 that we saw back in 2007.
Back then, the ASX 200 had shot up more than 30% in around 18 months. But that was before the stock market took a 50% haircut during the global financial crisis that was just around the corner.
There are arguably a few worrying signs in the global economy. Interest rates across the advanced economies of the world have risen sharply over the past year or two. High rates, at least in history, have often contributed to recessions, and by extension, to stock market crashes.
Inflation also remains a problem across those same countries. Just this week, we discussed the stubbornly high inflation still present in the US economy, and why that might mean interest rates could stay higher for longer.
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Is the next stock market crash coming in 2024?
But, at the end of the day, no one really knows when the next stock market crash will be. And I think it's something that most investors shouldn't worry about. Market corrections and crashes are an inevitable part of investing. But no one, whether that be Warren Buffett, Tim Cook or your taxi driver, knows when the next one is coming until it's here.
Every time I check my own stock market portfolio, I ask myself how I would feel about it if the markets crashed tomorrow. If there's a stock I'm worried about if the markets do crash, it's not worth holding when the sun is proverbially shining.
There are plenty of quotes that are relevant here… perhaps 'fixing a leaking roof when the sun is shining' is a good one. But it's the quote from legendary investor Peter Lynch, that I think most of us should keep in mind:
Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.
So look at your portfolio today. If there are any companies that you wouldn't feel comfortable owning in a stock market crash, ask yourself why you own them at all.
