Top
Image Alt

The Investing Box

  /  Editor's Pick   /  3 reasons the stock market could crash in September

3 reasons the stock market could crash in September

Burst your bubble thumbtack and balloon background

In August, the stock market was heading upwards. The FTSE 100 had broken through 7,500 points again. And optimists hoped that, maybe, we could finally be in for a bull run. We might even see 8,000 points or more.

But the market is heading down again in September. Might it even crash below 7,000 before the month is out? I think it could, and here are three of my reasons.

Oil

The oil price is falling. It’s not much comfort to people struggling with big energy bills yet. But it’s fallen below $90 per barrel, the cheapest for nine months. Why does that make a difference?

Well, Shell and BP are among the few FTSE 100 companies booming right now. They’re big too. Shell is the biggest in the whole index with a market cap of £165bn. BP is sixth at £85bn.

Both of those stocks have climbed in 2022, by around 50%-55%. If they turn downwards, the FTSE 100 should decline on that alone.

There’s been talk of a possible windfall tax in the UK to pay towards reducing our energy bills as winter approaches. So far, new prime minister Liz Truss has rejected that possibility. But it’s the kind of thing that could hit oil and gas shares.

Dividends

Going by forecasts, 2022 is coming very close to the record year of 2018 for total FTSE 100 dividend payments. But if dividends should falter, could that add another straw to the camel’s back?

We have had cuts already. Mostly they’ve been from mining stocks, like Rio Tinto. Rio’s interim dividend was sliced by 29%, as demand from China has been weakening. The mining giant did, however, point out that it was still its second biggest interim dividend ever.

I suspect investors might be looking nervously at housebuilders too. So far, first-half results have been healthy. So maybe the sector is fine. But any negativity from Redrow on 14 September might worry the market.

We have a lot more results due in September, and I’ll be watching for dividend news.

Recession

The Bank of England admitted this week that it’s powerless to prevent recession — though I’m not sure why anyone would have thought otherwise. The snippet of non-news nevertheless shook the financial world and sent the pound downwards.

I don’t see any real difference between a technical recession and not a recession, at least as far as company performance goes. Economies simply don’t keep growing smoothly and steadily. No, we have good years of economic growth, with the occasional year of shrinkage.

That’s all natural and expected, and long-term investors have largely learned to ignore it. But it still spooks those watching daily market movements.

Crash?

Will any of these things help tip us into a stock market crash? They really shouldn’t do that. And I doubt any individual event will make much difference. But taken together, there has to be a chance of tipping investors into a bearish mood and sending the FTSE 100 down.

If we do see a new market slump, it will only mean one thing to me. More cheap shares to buy, for longer.

The post 3 reasons the stock market could crash in September appeared first on The Motley Fool UK.

6 shares that we think could be the biggest winners of the stock market crash

The hotshot analysts at The Motley Fool UK’s flagship share-tipping service Share Advisor have just unveiled what they think could be the six best buys for investors right now.

And while timing isn’t everything, the average return of their previous stock picks shows that it could pay to get in early on their best ideas – particularly in this current climate!

What’s more, all six ‘Best Buys Now’ are available to access right now, in just a few clicks.

Learn more

setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()

More reading

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Redrow. 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.