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Professor Robert Shiller, a renowned student of behavioural finance, was awarded a Nobel Prize in economics in 2013.
He recently wrote an interesting piece for the Project Syndicate group entitled “The Two Pandemics” He is most interested in the less obvious pandemic that is starting to sweep across nations – it is “a pandemic of anxiety about the economic consequences of the [COVID-19] pandemic”.
His arguments draw on the ideas of imperfect rationality and heightened emotion, leading people down a path of feeding on each other’s fear, ending with panic. Understanding this phenomenon might help us gain some grasp of likely market trends.
Shiller says that the source of our anxiety is that we are unsure what action to take. Furthermore, the two pandemics may feed on one another:
“Business closures, soaring unemployment, and loss of income fuel financial anxiety, which may, in turn, deter people, desperate for work, from taking adequate precautions against the spread of the disease.”
If these pandemics were confined to one country the demand drop there may be lessened due to the continuation of its exports. But now recession “threatens nearly all countries”, so exports acro………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
