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According to a YouTube headline, Robert Kiyosaki is predicting a big stock market crash in 2023. And for anyone who doesn’t know him, he’s the businessman behind Rich Global and the Rich Dad brand.
And ‘The Big Short’ investor Michael Burry reckons stocks are due for a tumble. He correctly tipped the 2008 financial crisis. And he’s taken a massive $1.6bn gamble on the S&P 500 and Nasdaq both crashing and burning.
When two big names in the financial world predict a stock market rout, we need to get ready, right?
What to do in a crash
In one way, yes, I really think we should. Just maybe not in the way a lot of market bears might think.
I see people telling us to sell stocks, and get into bonds and fixed-interest securities. And maybe even gold. Strangely, I’m not seeing headlines championing Bitcoin this time. Well, maybe that’s not strange.
But here’s the thing. These bears are talking down the US stock market. And I see some good arguments that US stocks might be overvalued.
The S&P 500 is on a price-to-earnings (P/E) multiple of 26. That looks high compared to a long-term mean of 16. In fact, S&P stocks have been hot since the mid 1990s, compared to the long term.
Tech stock crash
The Nasdaq P/E, though, is lower at 19. That’s after a slump from the peaks of 2021. For some of the most promising growth stocks on the planet, I don’t think that’s too bad at all.
And over here in the UK, our modest little FTSE 100 doesn’t look even close to overvalued. It’s on a P/E of only about 11.5, well below its long-term average.
So no, I really don’t think we’ll see a UK stock market crash in 2023. Or in 2024.
And we must remember, big-betting Michael Burry has been calling the next financial meltdown for years now. And it hasn’t happened yet. Anyone can get it right once.
I hope I’m wrong
Now, I don’t think we’ll see another stock market crash any time soon. But I really hope I’m wrong, and I’ll tell you why.
Lloyds Banking Group shares are on a P/E of just 5.8 now and on my buy list for a top-up. But if they should fall back to the depths of 2020, that would drop to only 3.5.
That assumes Lloyds earnings themselves don’t falter. But the major bears are talking about shares being overvalued, not about any threat to earnings.
And never mind a once-in-a-decade chance, I reckon that could be a once-in-a-lifetime chance.
Even cheaper shares
And what about long-term income champion National Grid, with its forecast dividend yield of 5.6%? If National Grid shares should fall back to early Covid levels, that yield could be up to 7.2%.
If we get a crash this year or next, there would be many more like these. It would be like a global pandemic all over again, except without getting ill.
And I’d be buying every FTSE 100 share I could possibly afford.
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