Brace for the inevitable market crash

DID I just catch your attention? Let me share two reasons why I chose this headline. First, it is true that the stock market will turn down one day, we just don’t know when. Will it be this year, next year or in 2026? Nobody knows. When I started my career, I was told the “best” economists were the ones who gave a forecast or a time horizon, but never both!

The second reason is that we are all affected by negativity bias. You are more likely to read this article with an alarming headline than if I were to use something less alarming or, God forbid, even positive. We all give additional weight to negative news and views. Even I, despite having analysed financial markets for almost 30 years and arguably understanding the trade-offs, am afflicted by the same bias. I am always looking for what could potentially go wrong and lead to a sharp sell-off.

As with anything, self-awareness is only the first step. I am aware I am afflicted by negative bias, and I consciously try to counteract it.