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The markets safety net may be snagged, but it held

Why stocks recovered so swiftly from the summer madness

One major positive to be found in the latest bout of market madness is that, mercifully, the safety net worked.

Stock markets went through a mincing machine earlier this summer, in a shock that has left investors and analysts scratching their heads and wondering what just happened. For those lucky enough to have missed it, the short answer is that some weak US economic data generated an excuse to sell, and fiddly technical factors made the whole thing worse, only for markets to snap back to where they started, near enough, within days. It was a case of classic low-liquidity summer market conditions, with a little extra spice.

Ultimately, it all meant very little apart from that fund managers are quick to hit the sell button on stocks when they know they have ridden a powerful rally higher for months. After all, no one knows quite how markets will respond when interest-rate cutting season kicks off in the US, most likely next month.

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