2020 was a terrible time for investors. Britain's most prestigious index of British stocks fell to its lowest level in ten years in March when the Covid 19 crisis devastated the global economy. The subsequent aid rally runs out of steam and the footsie is on the verge of falling deep into the 5,000 point area as market confidence fades.
However, holders of FTSE 100 shares shouldn't be too desperate. In fact, I'm pretty optimistic! History shows us that stock indices keep coming back from stock market crashes in the long run. And equity investors have the chance to get very rich in the process.
During the stock market crash in 2008-2009, the FTSE 100 hit a nadir near the 3,800 point mark in February 2009. However, he returned in the following decade and reached an all-time high of around 7,500 points in the summer of 2018. Many bought in the depths of the crisis would make an absolute fortune at this time. And the market crash 2020 offers you and me a great opportunity to get seriously rich.
3 reasons why …
There are a number of reasons why we can expect FTSE 100 stock prices to rise from their recent lows in the coming years.
- The tremendous support from central banks helped companies avoid a complete breakdown after the first explosion of Covid-19, launch new stimulus packages, and lower interest rates. The extremely loose monetary policy should continue to support corporate earnings. Only this week, the Federal Reserve said it would keep interest rates at record lows "until it is confident that the economy has weathered recent events and is on the right track to meet its maximum employment and price stability goals."
- British stocks postponed, reduced, or cut dividend payments when the pandemic raged. This accelerated the sell-off of the FTSE 100 and other indices. However, these measures have increased the chances of a strong recovery in the share price. Why? Cash-intensive balance sheets are expected to improve profitability in the coming years and drive share prices north.
- The market sentiment remains shaky, but is slowly becoming more positive. If the major economies continue to control a second wave of infections, confidence will continue to improve. Positive news about a vaccine would also boost demand for UK stocks.
Expect the FTSE 100 to strike back
I'm not saying that the stock market recovery will be straightforward. The rise in FTSE 100 from the lows in March has recently run out of steam and confidence is likely to remain fragile for some time to come. Aside from concerns about Covid-19, investor sentiment is also under pressure from US-China trade tensions, Brexit and US political uncertainty.
However, I am confident that share prices will gradually rise as the business cycle begins. The 2020 stock market crash offers a great opportunity to buy FTSE 100 stocks at rock-bottom prices and get rich with increasing value.
After the crash, there are numerous high-quality British stocks to choose from.
The Post The FTSE 100 has doubled after the stock market crash in 2008! Here's why I think the missile will show up first The colorful fool Great Britain.
Royston Wild has no position in any of the stocks mentioned. The Motley Fool UK has no position in any of the stocks mentioned. The views of the companies mentioned in this article are those of the author and may therefore 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 taking into account a variety of insights us better investors.
Motley Fool UK 2020
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