If markets can’t be trusted to invest wisely, governments should step in

The vast majority of market funds come from institutional investors and fund managers dealing with other people’s money

Instead of driving boom and bust cycles, institutional investors should focus on basic and critical industries and improve capital market functioning

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A man walks past the New York Stock Exchange on July 8. Even as the US acknowledged a technical recession and the IMF warned of “gloomy” global economic prospects in July, global equities were staging a comeback. Photo: AP

Anthony Rowley

Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs.

Published: 3:30am, 8 Aug 2022

The financial world needs to stop playing the game of stock markets and get serious about how it invests money. Market players who engage in a constant game of “chips in, chips out and chips in again” are not the kind of people we need to be exercising stewardship of our financial resources.

Consider what happened in the last week of July. Even as the United States acknowledged a technical recession and the International Monetary Fund warned of “gloomy” prospects for the world economy, global equities were “staging a comeback”, according to the Financial Times.

Some investors began piling back into tech stocks, despite their recent slump, while an analyst at foreign exchange firm Oanda noted that “meme stocks”, or shares which have gained a cultlike following online and through social media, are back in fashion.

Because the stock market is seen as an entity rather than a collection of individuals, the actions of market players who are foolish enough to create a stock bubble, then scramble out at a loss, only to jump back in again for “fear of missing out”, go unremarked on and unpunished.

But whose money is it they are playing with? If market players consisted only of super-rich speculators happy to gamble away their wealth, let them get on with it. But, in reality, the vast majority of market funds come from institutional investors and fund managers dealing with other people’s money.

This is where the stewardship of capital comes in and it matters critically, not only to the likes of pension fund beneficiaries, insurance policy holders and mutual fund investors, but equally to those who need capital to put to active use in myriad ventures.