Equity market crash ?

Martico

This feels like the early days of a self-fulfilling prophecy

Altior

Presumably shortly followed by the biggest gains in 'absolute value'.

Context is everything, and from my recollection, the falls in April had not even eroded gains from the preceding year.

michael1234

subjecttocontract said:

World Politics will play a big part in stock market performance and there is a long list of things that could happen. But we aren't allowed to discuss politics on this forum so we'll all have to wait until something happens.

No doubt this subject (of whether it should or shouldn't be allowed) as been discussed many times and/or isn't allowed to be discussed - I'm not sure. Either way, politics is a major driver of investments. Perhaps a discussion ought to be allowed in that context?

masonic

michael1234 said:

subjecttocontract said:

World Politics will play a big part in stock market performance and there is a long list of things that could happen. But we aren't allowed to discuss politics on this forum so we'll all have to wait until something happens.

No doubt this subject (of whether it should or shouldn't be allowed) as been discussed many times and/or isn't allowed to be discussed - I'm not sure. Either way, politics is a major driver of investments. Perhaps a discussion ought to be allowed in that context?

Political debate is not allowed because it often leads to partisan squabbling and derails threads, leading to work for the forum team. This is first and foremost a money saving forum, so any non-moneysaving posts (including my one) are potentially at risk of being removed. Though there is a separate board for discussing forum policies and rules: https://forums.moneysavingexpert.com/categories/forum-policy-rules-discussion

dunstonh

Doesn't that depend on which definition of a crash you are using? No doubt you'll point me to THE definition but regardless, I suspect the OP meant a crash bigger than last April.

S&P500 fell by 22.23% earlier in the year for those invested in Sterling.
23/01/2025 was the peak, and 21/04/2025 was the trough, and after Friday's fall, it is lower than in January.



There have been times over the years when UK investors were shielded from the S&P crashing because of currency movements going the other way.

Here is the same chart for those using dollars (i.e. Americans and those that currency hedge to dollars): 



Note that the peak and trough for dollars was different to Sterling as well as the recovery point 

So, whilst in dollar terms it didn't crash (18.4% just short of the often used 20% reference point), for Sterling investors it did crash at 22.23%

Bostonerimus1

dunstonh said:

Like we all know equity markets always crash every so often

About 1 in 4 years has a crash and the last one was earlier this year.

Your investing strategy should take account of crashes that will certainly occur. In Drawdown that's why we have the "4% rule" and it's cousins and tools like annuities. 

As this is a UK site, the US 4% SWR won't apply.     UK is closer to 3.5% in your 60s and 3.0% in your 50s.

Hence the use of the quotation marks and the allusion to cousins. I used "4% rule" as a name for such SWR models as Trinity or Bengen are not as widely known.

Albermarle

subjecttocontract said:

World Politics will play a big part in stock market performance and there is a long list of things that could happen. But we aren't allowed to discuss politics on this forum so we'll all have to wait until something happens.

However trying to predict the effect of events that have not yet occurred is more guesswork than politics. 

Alexland

dunstonh said:
As this is a UK site, the US 4% SWR won't apply.     UK is closer to 3.5% in your 60s and 3.0% in your 50s.

I agree and have for many years been planning 1/35th drawdown from 55 around 2.86%.

However with inflation linked annuity rates at around 4.25% from 55 then it seems rational to take profits from the equities and switch into long dated inflation linked bonds to synchronise with annuity prices until 55 to get around 50% more income without needing to worry about when markets might next crash. It's quite a mindset change after being 100% equities during the years bonds were so overvalued. For the past few days I've been trying to think of any good reason to still hold any equities in my pensions.

InvesterJones

Alexland said:

dunstonh said:
As this is a UK site, the US 4% SWR won't apply.     UK is closer to 3.5% in your 60s and 3.0% in your 50s.

I agree and have for many years been planning 1/35th drawdown from 55 around 2.86%.

However with inflation linked annuity rates at around 4.25% from 55 then it seems rational to take profits from the equities and switch into long dated inflation linked bonds to synchronise with annuity prices until 55 to get around 50% more income without needing to worry about when markets might next crash. It's quite a mindset change after being 100% equities during the years bonds were so overvalued. For the past few days I've been trying to think of any good reason to still hold any equities in my pensions.

Once you've met your goals, definitely. No need to take any more risk than needed.

Albermarle

Alexland said:

dunstonh said:
As this is a UK site, the US 4% SWR won't apply.     UK is closer to 3.5% in your 60s and 3.0% in your 50s.

I agree and have for many years been planning 1/35th drawdown from 55 around 2.86%.

However with inflation linked annuity rates at around 4.25% from 55 then it seems rational to take profits from the equities and switch into long dated inflation linked bonds to synchronise with annuity prices until 55 to get around 50% more income without needing to worry about when markets might next crash. It's quite a mindset change after being 100% equities during the years bonds were so overvalued. For the past few days I've been trying to think of any good reason to still hold any equities in my pensions.

So you can make more and more money and have a really BIG pension pot. ( even if you do not really need one  )

More seriously, my view is more about maintaining diversification.
If I look at the big picture of our household finances, including value of home, pension, S&S ISAs, cash savings, state pension, DB pension etc I can make an approx guess that the % of equity is just less than 20%.
In the long run that might just help to keep us ahead of inflation.
Whether that is a sensible way to look at, I am not really sure !