3 Surefire Stocks to Buy If There’s a Stock Market Crash

Most folks won’t be thrilled to hear this, but a stock market crash or double-digit correction might be on the way.

To be crystal clear, no one can predict with any long-term accuracy precisely when a crash or correction will occur, how steep the decline will be, how long it’ll last, or in many instances what’ll precipitate the move lower in the broader market. But one thing is clear: Crashes and correction are a normal part of the investing cycle and the price of admission to the greatest wealth creator on the planet.

Image source: Getty Images.

History isn’t the market’s friend in the near term

At the moment, there are no shortage of tailwinds for a stock market crash. In particular, history doesn’t look to be the friend of the benchmark S&P 500 (SNPINDEX:^GSPC) over the short term.

For instance, the widely followed S&P 500 has behaved similarly following each of its previous eight bear-market bottoms, dating back to 1960. Within three years of bouncing back from its trough, the S&P 500 has always had one or two instances where it’s declined by at least 10%. Rallying from a bear-market bottom is a bumpy process that takes time. With the broad-based index doubling in value in less than 17 months, there’s a good chance we’re long overdue for some “bumps.”

History is no fan of extended valuations, either. As of the close of business on Monday, Oct. 4, the S&P 500’s Shiller price-to-earnings ratio was north of 37. The Shiller P/E takes into account inflation-adjusted earnings over the past 10 years. While access to information over the internet has helped expand P/E multiples since the mid-1990s, history is quite clear that bad things happen when the S&P 500’s Shiller P/E crosses above 30. In the previous four instances this has happened, the broad-based index shed at least 20% of its value.

Even the history behind margin-debt usage is worrisome. Although it’s perfectly normal for nominal margin debt outstanding to increase over time, it’s not normal for margin-debt usage to skyrocket higher in a short time frame. There have been three instances since 1995 where margin-debt usage jumped by at least 60% in a given year. Two of these instances were directly before the dot-com bubble burst and the financial crisis began. The third instance is in 2021.

The table would appear to be a set for sizable but healthy pullback in the S&P 500.

Image source: Getty Images.

A crash or steep correction is the perfect time to buy these surefire stocks

While big moves lower in the market are known to cause investor anxiety, they’re also the perfect opportunity to pounce. You see, whereas history isn’t the market’s friend in the short run, it’s unquestionably the greatest ally of investors over the long term.

For example, there’s never been a rolling 20-year period over the past century when an S&P 500 tracking index wouldn’t have generated a positive annualized total return for investors. A crash or correction is…