Stock market crashes: the sound of the bugle

Then the first days of the war in Ukraine had plunged the world into terror, against the backdrop of Vladimir Putin’s warning about Russian nuclear forces, stock markets were crashing. Eight weeks later, on the other side of the Atlantic, the consequences are almost erased. In Paris, without reaching its historical maximum of 7,316 points on January 5, the CAC 40 index now moves around 6,500 points, well above the 5,962 points, the level to which it had fallen at the beginning of the invasion of Ukraine .

Based on the slightest hypothetical progress in talks between the aggressor and the attacked, investors sometimes seemed to act as if the Ukrainian issue was on the way to being resolved. They gave the impression that the financial consequences of this conflict on the eastern flank of Europe would dissipate in the not so distant horizon. It is true that stockbrokers have a habit of anticipating, buying to the sound of cannons and selling to the sound of bugles, at the risk of being accused of insensitivity to the misfortunes of the world. However, these forecasts are very fragile.

According the surveys

First, informed observers agree that the war waged by Vladimir Putin can last. So even if it were to stop quickly, it should affect the economy for a long time. Finally, in addition to the conflict in Ukraine, there are many other threats. In France, the stock market will evolve in the coming days at the rate of the surveys. Investors do not want to believe in the election of Marine Le Pen and risk brutality if the opinion polls do not go in that direction. But it is above all the economic climate that has changed in the world.

Also read: Article reserved for our subscribers What past stock market crises teach us

The period in which liquidity flooded the financial markets favoring their departure is coming to an end. Central banks’ reactions to the rise in inflation may have been delayed, but they will have to do so, at a more sustained pace than anticipated some time ago, increase your key rate. A more expensive money that, together with the rise in the price of raw materials, will weigh on the world economy. Investors will show a fever in the coming months, which will cause volatility in the indices, that is, sudden changes in prices in a very short period of time. Should savers, in this context, avoid stocks? Especially not! In the first place, because this type of investment can only be conceived in the long term. Then, because what the analysis of previous stock market crises teaches us is that recovery movements can be as fast as they are unexpected. Woe to those who are not invested in the markets at the time: they risk missing out on a good part of the rebound.

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