Fear paralyzes on the stock exchange, being cool helps

Sales clerk in a shop in Yueyang, China

The spread of the virus is weighing on trade.

(Photo: AFP / Getty Images)

Mysophobia on the stock exchange? In a way yes. Doctors use the technical term to describe the fear of illness due to contact with bacteria and viruses. Those affected often suffer from compulsory washing. That may not be a disadvantage in the current corona location. But financial experts are more concerned with classic fear in the sense of a perceived threat of share price losses.

The best indicator of this fear is the volatility index, which is often shortened to “Vix” in the industry. It extracts the expected fluctuations in investors’ value from the option prices for the S&P 500 on the leading financial market, Wall Street. The Vix remained at a historical low for a long time.

So the investors were fearless. But within a few days the fear barometer had more than doubled because of the corona worries. The global 13 percent drop in stocks in the past trading week tipped a previously relaxed mood into the opposite.

Fighting the epidemic could do more harm than the virus itself. And it doesn’t seem to be stopping spreading across the globe. Restrictions on trade due to the containment measures, however, slow down the economy. The OECD, as an organization of developed countries, sees the virus as the greatest threat to the global economy since the financial crisis. There is a real danger that investors will only see black. You may even get scared of your own fear, known as phobophobia among medical professionals. In this case, real panic sales would also be conceivable.

Investors may still need some time to look ahead in the typical way – after the virus wave. However, this should not take long. For mobile investors, it is important to buy shares in good time before the improving reports about the spread of the disease.

The potential enemy is in your own body. And this opponent is not going viral. He paralyzes his own thinking and doing: It takes the cool courage to buy orders when the news situation still seems cloudy. The doctor knows such fears of decisions from his practice. He calls it cairophobia.

More: Who will help the financial markets in the corona crisis? There is an answer to the question.


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