Market Faith in Anxious Times
As markets tumble again in China, with ripple effects across the globe, concerns about the role of fear and anxiety in market behavior have reemerged. Is the sharp decline based on "real" changes in value or the result of speculation and a herd mentality? Are emotions and anxieties the actual source of the problem? Calls for calm are being issued. After the previous crash last August, Chinese authorities even cracked down on the spread of rumors about market activity! Analysts around the world hasten to explain the economic forces at work, with many calling for renewed trust in the market.
It's important to understand what's behind this language of calls for market confidence, because it bears on how we respond to crises like this one.