Dear readers, the Singapore stocks benchmark indicator, the Straits Times Index (STI) was 3,240.58 as at 20 May 2022.
As at 20 May 2022, the SPDR STI ETF has a Price-to-Earnings ratio of 13.46.
Given the recent stock markets volatilities, the stock market chatter was that it would be a matter of time rather than whether for the next stock markets corrections to come.
The lowest price to earnings ratio of the Straits Times Index (STI) was about 6 during the global financial crisis in 2008.
If the Singapore Straits Times Index (STI) reach to a price-to-earnings ratio of 6 again in the upcoming recession, then STI would reach 3,240.58 multiplied by 6 divided by 13.46 = 1,444.53 level. This translates to an approximately 55.43% drop from the current STI level.
A 1,444.53 level for the Straits Times Index in the next stock market corrections. While this may seem not possible, nothing is impossible when it comes to the financial stock markets. Examples are former Straits Times Index (STI) constituents which have done very poorly to the extent of being delisted. Or the recent crash of Luna.
In any case, it always is good to get prepared for the next stock markets crash which is getting nearer by the day!