is a speaker, independent wealth management consultant and author of three books on investing and decision-making.
This idea was put to the test recently. The first full week of August began with a jolt. The Dow Jones index,dropped 1,000 points. The Japanese Nikkei 225 index, N225 fell more than 12 per cent, its worst decline since 1987. These sharp swings caused a wave of anxiety among investors. Many rushed to sell their stocks, while others scrambled to understand the latest economic data.
The market drop was eerily similar to that in March, 2020, when markets plunged as COVID-19 spread. Back then, fear and uncertainty from the pandemic gripped investors, leading to mass sell-offs on the back of limited data and spurious forecasts. But those who ignored the noise and stayed invested saw a remarkable recovery. By the end of 2020, major indexes not only recovered but hit new highs.
Another contributing factor to the recent volatility was many investors’ sudden realization that the market had gotten ahead of itself. The generative artificial intelligence frenzy overlooked the fact that this technology may generate headlines but increasingly looks unlikely to generate enough profits – for sellers or users. Such a hype versus reality collision always affects markets – we have seen it before during the dot-com boom , the resource boom , the fintech boom and so on.