Justin Urquhart Stewart: Lizards v reasoners in financial markets

Emotions move markets

clock • 3 min read

When markets are as volatile as they have been of late, writes Justin Urquhart Stewart, investors need to ask if there is something wrong with the fundamentals or if it is more that emotions are in play

In December 2018, US equities fell by 16%. On Christmas Eve alone, they lost 4%. Little of substance had changed in the global economy over the preceding month and yet investors turned negative in droves.  After Christmas and through the first two months of 2019, the US equity market rose by nearly 20%. On 4 January alone, it gained 3%. Again, little of substance had changed in the global economy and yet investors became excited again. In short, emotions move markets.  And emotions move markets because markets are made by humans. The human brain is not a cool, calculating, analytic...

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