A top money manager thinks there will be ANOTHER stock market crash in 2023! This is what I would do

As fears of a recession mount, investors are agitated by the uncertainty surrounding a possible stock market crash in 2023. And these fears may well be justified.

Last month, legendary British investor Jeremy Grantham released his Outlook Letter 2023. And it didn’t look pretty. For those who don’t know, Grantham co-founded GMO, an investment management company founded in 1977. Since then, assets under management have grown exponentially to an estimated $65 billion.

In his letter, he listed a host of factors that may point to a 16.7% decline in the S&P 500 at the end of the year. And that was his most optimistic view. At worst, he predicts the stock market will crash by as much as 50%!

Does this mean investors should start selling everything and run for the hills? No. Let’s take a closer look at what’s going on.

Research into the possible stock market crash in 2023

In the letter, Grantham outlined key catalysts for a potential impending decline. And it’s nothing that hasn’t been talked about before: Covid-19, Ukraine, supply chain disruptions, inflation and interest rates. But what worries him about a stock market crash is that the current bear market is actually quite unusual.

Throughout history, every bear market has been triggered by different factors. But they share some common features:

• A decline in corporate profits
• A slump in the housing market
• An economic recession

And yet none of these actually happened. Looking at some of the latest S&P 500 earnings reports and even FTSE 100 companies, profits have increased on average, with some companies reaching record highs. Meanwhile, the housing sector, while showing some signs of weakness, is showing some resilience. And as for a recession, there has yet to be one.

Therefore, Grantham believes that a bubble still exists and that a stock market crash is imminent.

What now?

As persuasive as Grantham’s arguments are, there is another possible explanation. The central banks’ objective of achieving a soft landing is working. That may be a naive thought, but even Grantham admits that interesting investment opportunities remain, even with a possible stock market crash looming.

So what should investors do? Trying to time the market is a loser’s game that often results in investors missing out on significant wealth. Instead, the best practice, in my experience, is to use the average of the cost in pounds. Instead of putting all available capital into stocks at once, it’s better to trickle it over time.

With this simple buying strategy, investors can still take advantage of today’s low prices if the stock market continues to rise. At the same time, if Grantham’s forecast comes true, there will still be enough cash available to take advantage of even cheaper valuations later in the year.

Remember, the stock market has an excellent track record of recovery driven by high quality companies. So while the short term remains shrouded in uncertainty, the long-term wealth accumulation potential remains crystal clear.