Oct 31st 2024

Investors should not fear a stockmarket crash
Take a long view, and shares are a lot less risky than many realise
A bottle of Champagne and a glass inside of a “Break glass in case of emergency” box.

Illustration: Satoshi Kambayashi

Oct 24th 2024

Shareholders are enjoying one of their best runs in history. Since a trough last October the S&P 500 index of large American firms has risen by more than 40%; peers in Europe, Japan and Canada have all gone up by at least half as much. The fears of last year, that stubborn inflation would prevent central banks from cutting interest rates, keeping bond yields high and dragging share prices down, have all but vanished. In fact, many of the world’s monetary guardians have been slashing borrowing costs just as corporate profits have climbed and animal spirits have surged. The result is that plenty of stockmarkets are now hovering near all-time highs.

Accordingly, investors are engaged in the activity that is traditional for such moments: not sending champagne corks flying, but obsessing about whether the good times are already over. They are hardly short of reasons to fret. Relative to underlying profits, American stocks have rarely been pricier, and then only before big slumps. Unnervingly, more than a third of the S&P 500’s market value is concentrated in just ten firms. Spurred on by rich-world governments’ insatiable appetite for borrowing, and especially the prospect of Donald Trump entering the White House and sending America’s deficit even higher, bond yields are again rising quickly. Volatility is up, too, and gold—typically seen as a hedge against chaos—has been on a rally for the ages. A crash would need a catalyst. But a lot of other potential causes are already in place.