Could there be a stock market crash in 2022? What could cause it? If there is a crash, here’s one stock I’d buy for my holdings.
Stock market crash ahead?
Soaring inflation (rising consumer prices) is a major concern right now, especially in one of the biggest economies in the world, the US. In December of last year, the Consumer Price Index (CPI) rose by 7%. This was the highest rise since June 1982. Inflation could hamper US economic post-pandemic recovery. This could cause a repeat of the crash in 1982 in the US. When one major economy crashes, others tend to follow, causing a stock market crash.
Due to the pandemic, many governments and central banks needed to print money, more technically known as quantitative easing, to boost liquidity. This has supported equity markets since the pandemic began. Near-zero interest rates have led to a surge in investors buying stocks. With interest rates on the rise and less quantitative easing, investors could sell stocks, causing a market crash.
The Chinese economy is viewed as one of the largest in the world. Any issues there could cause knock-on effects for the rest of the world. Recently, the Chinese economy’s growth has slowed which is a concern. In Q4, China’s gross domestic product (GDP) growth was recorded at 4% year on year. This was its slowest pace in 18 months. An additional crisis in the Chinese real estate market could also trigger a crash.
It is worth noting all of the above reasons are currently speculation and there is no way of determining if a stock market crash will definitely occur.
1 share I’d buy
If there were a crash and shares cheapened, I would look to add Ashtead (LSE:AHT) shares to my portfolio. Ashtead is an international construction equipment rental firm. It has a presence in the UK, US, and Canada. As I write, it has over 800,000 customers on its books and is recognised as a major player in its sector. It is worth noting renting equipment is often more cost effective than buying equipment in the construction industry.
If there were a stock market crash in 2022, Ashtead shares would most likely fall and the company’s fundamentals look good to me. As I write, shares are trading for 5,230p, which is a 258% return from March 2020 crash lows of 1,457p.
Demand for construction equipment has been rising in recent years, and post-pandemic recovery has seen it soar even further. Ashtead’s recent and past performance has been positive reflecting favourable market conditions and its own dominance in the market. In addition to this, Ashtead has a decent dividend yield that could make me a passive income. This dividend could be cancelled if a crash occurred, albeit temporarily, however.
As well as the issues that come with a crash, including slowed growth and performance, Ashtead could see other issues. New Covid restrictions could also hamper recovery and growth as well.
History has taught me that when a stock market crash occurs, construction is one of the sectors that usually bounces back quickly, hence why I like Ashtead shares in the event of a crash. The need to build infrastructure and stimulate the economy is vital to the world economy rebounding. Ashtead shares could be a good addition to my portfolio if a crash does occur.
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Jabran Khan has no position in any of the shares mentioned. 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.
