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For stock markets in 2022, April is the cruelest month
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In his acclaimed 1922 poem land of wastethe American-English poet TS Eliot wrote: “April is the cruellest month, breeding. Lilacs out of the dead earth, mingling. Memory and desire, moving. Roots dull with spring rain. And April was certainly the cruelest month for investors so far in 2022, as global stock markets crashed.
Global stock markets fall in April
First, I’ll start with some welcome news for UK investors. As stock markets fell elsewhere in the world, the London Stock Exchange proved to be a haven of peace. UK blue chip FTSE100 clue in fact won nearly 0.4% this month – one of the few stock indexes to climb in April.
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Markets around the world are reeling from the current situation in Ukraine and with so many big companies trading at what appear to be discounted prices, now may be the time for savvy investors to grab some potential bargains.
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Across the Atlantic, the world’s largest stock markets suffered sharp falls during this most cruel month. the S&P500 The index has lost 8.8% since March 31, leaving it almost 690 points (-14.3%) below its record of 4,818.62 points on January 3, 2022.
Worse yet, heavy tech Nasdaq Compound the index crashed nearly 13.3% this month, its worst performance since 2008. That leaves the index nearly 3,880 points (-23.9%) below its all-time high of 16,212.23 points on November 22, 2021. This week’s drop has sent the Nasdaq into a bear market (where a stock market falls 20% or more from a previous high).
Elsewhere in the world, most equity markets produced negative returns in April. The European STOXX Europe 600 the index lost just 1.2% this month, while the Japanese Nikki 225 the index fell by 3%. In China, the Shanghai Composite Index plunged 7.2% this month.
Oil on top, gold on bottom
Away from global equity markets, two other major assets posted mixed results. The price per barrel of Crude Brent Oil ended April at $107.14, up a few dollars this month but well below the high of $139.13 on March 7 of this year. And the price of an ounce of gold closed April at $1,896.95, down 2.3% in April.
Should I be worried about falling stock markets?
For most of my 35 years as an investor, I had an almost morbid fear of stock market crashes. In my life I have witnessed Black Monday (the October 1987 meltdown), the dotcom meltdown of 2000-03, and the global financial crisis of 2007-09. More recently, I reported on what I called Meltdown Monday at the time: the March 2020 crash triggered by the Covid-19 lockdowns.
But one thing I remember about those four stock market crashes is that they came after long periods of exceptional performance. Stock prices and underlying company fundamentals reached historic highs in 1987, the late 1990s, mid-2000s, and 2019 to 2021. In other words, the stock market crash largely blew up the froth of already overinflated stock prices. And, for me, that’s exactly what’s happening again right now.
For the record, the S&P 500 jumped 28.9% in 2019, 16.3% in 2020 and 26.9% in 2021 (all excluding dividends). After such exceptional gains, price declines were almost inevitable, as I repeatedly warned in late 2021. So while my family wealth has dwindled since late 2021, I’m not that upset. Some prices are already attractive, but we are also building up a large cash “emergency fund”. And if prices continue to fall, then I’ll buy cheap stocks that will pay juicy cash dividends!
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