According to a classic expression, the stock market is driven by two emotions: fear and greed. The phrase has become worn out because it is true. The saying indicates that what happens on the stock market is connected to the human psyche – a collective mirror image of the soul. It’s not a pretty sight, anyway.
Does anyone remember the day Vladimir Putin ordered mobilization in Russia? It was news that in Sweden triggered searches for words such as “nuclear war” and “iodine tablets,” according to Google. Stockholm Stock Exchange’s reaction? It rose by one percent.
Statistics that came out the other week showed that unemployment in the US was lower than expected. Good news, then. Not for the stock market. It fell steeply. The next day, the bridge to Crimea was blown up. An event that increased the risk of an escalation of the war. Worrying news, then. Not for the stock market. When the Stockholm Stock Exchange opened on Monday, the rates rose.
That’s how it goes. If the stock exchange had been a person, we would have ended our acquaintance long ago. Who wants to hang out with someone who pops bubbles when there are weapons of mass destruction and starts to sulk if more people get jobs? A hollow-eyed Gollum figure with gold soot shuffling around in a cave and hissing: “the interest rate, what’s the interest rate?”.
It is the interest rate that matters these days. Only. If all kinds of misery wash over the world, the stock market calculates that the interest rate will go down. If the economy shows signs of strength, the fear of interest rates grows. Rates are falling. It is almost as if the financial market has become the enemy of humanity.
It’s strange because the market is us. Ultimately, it is so-called ordinary people’s pension and savings money, together hundreds of thousands of billions, that form the fuel in the capitalist engine that now seems to have developed a kind of autonomous intelligence.
How did it get that way?
The simple answer is that the market does exactly what we tell it to do. It chases returns at all costs. Kind of like a primitive version of a self-driving car that follows instructions to move between points A and B regardless of what life forms happen to get in its way.
To complete the task of increasing our capital, the market, in the form of the intermediaries we hired, has been forced to become very inventive.
Who can even explain what the “stock market” is today? The image of a cigar-puffing elderly man reading annual reports and then calling his broker to place a buy order has long since been retired. Today, the stock market consists of an unmanageable hodgepodge of hedge funds, algorithm-controlled robot traders, day traders and huge funds that follow indexes as closely as a well-behaved dog follows its master. The latter may not have been so successful. The last ten years’ IT frenzy on the stock market has meant that companies such as Facebook, Amazon, Google and Netflix have made up a large proportion of the index and, thus, of people’s savings. Shares have now fallen by between 35 and 70 percent.
On our behalf, the same financial market has fallen in love with loans of various kinds, which explains today’s extreme sensitivity to increased interest rates.
That the stock market is capricious is not a new phenomenon. What is new is that so many parts of society, from small savers to presidents and prime ministers, take stock indexes seriously. As if it were the most critical indicator of how we humans are doing. If the stock market goes up, everything is okay. If the prices fall, it is a crisis.
In the attention-grabbing film “Don’t look up,” about how the distractions of modern life shift the focus from approaching danger, there is a possibly somewhat overly obvious final scene. When everyone knows doomsday is just seconds away, a group of people, including a scientist played by Leonardo DiCaprio, sit and eat dinner as if nothing special is about to happen. It is entirely unrealistic. In reality, we would fiddle maniacally with our mobiles. “How’s the stock market going?”.
Original Source: Aftonbladet, Sweden