The Behavior We Are Seeing Today: Panic Buying & Market Volatility

 03.17.2020

Walking through the supermarket yesterday, I noticed a familiar sight – empty shelves. As Floridians we accept that every fall our lives will be disrupted by a hurricane or two. Sometimes we get lucky and the hurricane doesn’t make landfall, but other times we spend a week buying water, filling sandbags and pulling in the patio furniture. While we never know until the end whether we will get hit, one thing is for certain: there will be a shortage of water.

Today we are seeing similar examples of “panic buying” but this time it is not water, for some reason it is toilet paper. We have all heard about the shortages on the news and many of us have experienced it in person. What is specifically interesting about this shortage is that COVID-19 has no gastrointestinal characteristics. It’s respiratory. Why not a run on Kleenex?

Regardless of the reason, it’s a fair question to ask – what causes this level of mass hysteria? Psychologists state that it is a mix of fear, herd instinct and a desire for control in an otherwise uncontrollable situation. Although not entirely synonymous, we are seeing some of these characteristics play out in markets today.

Let us first state, there are real and significant economic implications to what is occurring right now with COVID-19. People are sick, businesses are distressed, and economies are struggling. With that said, the current market selloff will go down in history because of the extent and speed as to which it declined. Why? It is a mix of fear, herd instinct and a desire for control in an otherwise uncontrollable situation.

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