In part, the stockmarket’s plunge reflects past complacency

THE SPEED of the sell-off in global stockmarkets is remarkable. On February 19th the S&P 500, America’s main index, reached a record high. Little more than a week later, it has lost one-eighth of its value. The change in mood is astonishing. Last year was the best for global equities since 2009, with the MSCI world index rising 24%. A week of turmoil finished only when traders headed home for the weekend on February 28th. Japan’s Topix index had fallen by 9.7%, the Euro Stoxx 50 by 12.4% and the S&P 500 by 11.5%, its biggest weekly loss since 2008.

Investors had begun 2020 in an optimistic frame of mind. Bank of America’s monthly survey of global investors, taken during the second week of February, found that investors expected world economic growth to strengthen this year and profits to improve. They had positioned their portfolios accordingly. Their weighting in equities was at a 20-month high and their cash holdings at a 58-month low. Just over a fifth of fund managers saw the coronavirus as a significant risk, but even more were worried about the American presidential election or a sudden collapse in the bond market.