LEILA FOURIE: How do we get back to rational investing?
The return of rationality in the markets depends on real and effective action by business, government and central banks
Five years ago, my PhD thesis on financial contagion warned of the potential dislocating effect of a contagious event in China. Though I extended the Black Plague metaphor to financial markets, I never expected I would have to navigate SA’s stock exchange through the effects of a coronavirus pandemic.
In March, the JSE had two of its five largest one-day drops in the all share index (Alsi), and the single-largest one-day gain. By the end of March, the Alsi was down 22% and major banks had shed 48% in market capitalisation in the year to date. The volatility reflected uncertainty in the global economy, and our local market bore the brunt of a rush for perceived safe-haven assets...