Financial markets have been acting like crazy. During the past few weeks, the ups and downs of the Street could be seen as symptoms of bipolar behavior from the standpoint of any psychologist. We have seen multiple established companies with swings in the stock price ranging 20%. This is sheer madness.
Analysts blame China and a soon-to-be hard landing of the Asian giant. Most likely, this errant behavior has been amplified by the algo trading so common these days. It’s hard to say if the unwinding of US’s QE is also having an impact but I believe so. Shifts in the monetary fluxes cannot be disregarded as sources of stock marketing scares.
However, the presented reasons are just noise. Predicting a stock market downturn is no easy task and thinking that we can identify one main single driver that has the power to tell us the future, is just arrogance. Remember, the last crisis started with an overlooked mortgage system that ended up contaminating the whole system. Don’t go after big headlines, usually, the important things are happening under our noses. The trick has been the same since ever: find good stocks and keep them.
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