If you've been fretting over the possibility of an ASX stock market crash, you're not alone.
After setting a series of new all-time highs recently, the S&P/ASX 200 Index (ASX: XJO) has closed in the red for the past four trading days. In morning trade today, the benchmark index is down 0.1%.
Yesterday was particularly painful, with the ASX 200 closing down 1.8%.
It's a similar story in the United States and European markets.
Across the world, investor fears have been stoked on one side by rising fears of a full-scale war in the Middle East. And on the other side, that sticky inflation will push central bank interest rate cuts out to the end of 2024, or beyond.
And, indeed, a market correction may well be on the cards, with valuations already running on the high side.
But an ASX stock market crash?
Unlikely, according to Shane Oliver, chief economist at AMP.
"While shares may be vulnerable a pull back and a period of increased volatility, several considerations suggest that the bull market will remain intact and the trend in shares will remain up," he says.
Below we look at five reasons the bull market can keep charging ahead.
Tech bubble fears overblown
The first reason an ASX stock market crash looks unlikely, Oliver says, is that, "US, global shares and Australian shares are still tracing out a pattern of rising lows and highs from 2022, which is still consistent with a bull market."
So how about the resurgent tech-bubble fears amid the surging Nasdaq Composite Index (NASDAQ: .IXIC), up 51% since the start of 2023?
According to Oliver, "The tech and AI centric stocks of today make real profits so Nasdaq's PE is around 35 times, not the 100 times plus it was at the tech bubble high in 2000."
The second reason to be optimistic, Oliver says, is that "while there are areas of weakness, global and Australian economic conditions generally continue to hold up far better than feared".
And the third reason he says the bull market can run on and trample any potential ASX stock market crash is that:
Despite the relative resilience of economic activity inflation has fallen sharply globally (from highs around 8% to 11% to around 3%) and will likely keep falling allowing rate cuts… While rate cuts have been delayed, they are still likely.
Bull run or ASX stock market crash?
Oliver continues that China represents the fourth reason the stock market bull run can keep running.
"While Chinese economic growth is not as strong as it used to be it seems to be hanging in there around 5% despite its property slump," he says.
Oliver notes that the iron ore price has come down in 2024.
However, he adds:
It remains in the same range it's been in for the last two and a half years and well above many assumptions. Furthermore, the copper price appears to be breaking higher which is normally a sign of strength.
And the fifth reason you shouldn't lose sleep over a potential ASX stock market crash is that the sabre rattling we're hearing in the Middle East may not result in seeing all those sabres drawn.
"While geopolitical risks are high, they may not turn out the be as bad as feared – much as was the case last year," Oliver says.
He points out:
Iran's retaliation to the attack on its Syrian consulate was similar to its response when General Soleimani was killed by the US in in 2020. It was well flagged, measured and there was minimal damage and designed not to provoke a bigger Israeli counter-retaliation.
So sleep well, and keep your eye on those long-term investment goals!
