Don’t panic about the stock market plunge

The Dow drops by eleven hundred points, its largest one-day fall ever. Equities around the world crash in sympathy. The bond markets are rattled, picture editors start looking for their stock photos of traders gazing despairingly at their Bloomberg terminals, and anxious-looking analysts turn up on TV warning that a recession might be just around the corner.

True, more than one thousand points off the Dow, and two hundred off the FTSE in the space of a few hours might look scary. To anyone trying to trade it minute by minute it can certainly be nerve-jangling. And yet, in truth there is far less to it than first appears. Over the next couple of years we should probably get used to these kind of violent swings in sentiment. Why? Because the stock markets have become far more automated, and because we are in the late stage of a bull run.

Yesterday’s price moves were certainly dramatic.