Whatever the shock to markets, equity investors have a strong impulse: buy the dip. The latest ructions relating to China’s apparently poorly anticipated crackdown on foreign-listed shares could test this reflex.
The buy-the-dip muscle memory is strong. One after the other, potential hits this year have proven to be passing hiccups. An explosion of retail trading fervour at the start of 2021 provided lively entertainment and posed some tough questions around the everyday punter’s access to public markets. However, it left the rest of the investor community largely unscathed.
The fierce pullback in the US government bond market in the first quarter failed to have a lasting impact on equity investors’ enthusiasm. The implosion of the Archegos family office, complete with multibillion-dollar hits to a clutch of investment banks, stayed in its lane. And more recently, the wobble attributed (rightly or wrongly) to the Delta variant of coronavirus faded the following day. They just don’t make proper market shocks like they used to.