Macroscope | In 2023, let’s replace stock market gambling with truly responsible investment
- The enormous market losses of 2022 highlight a need to rein in the tendency of investors to pour money into one place
- This is all the more important given the unmet demand for funding in areas like pandemic readiness and climate resilience
According to data collected by the Financial Times, US$30 trillion (around one third of the annual value of global GDP) was wiped off world stock and bond market values in 2022, with a broad developed and emerging market equity index falling by 18 per cent while bonds slumped by 16 per cent.
If this reflected simply the gambling instincts of wealthy punters playing in a casino, we would not need to shed tears. But most of the lost money belongs to pension funds, mutual funds insurance companies and the like. In other words, to you and me.
Where was the sense of financial responsibility that such institutions are supposed to exercise on behalf of their pensioners, policy holders or shareholders? Where was the caution that asset managers who advise such institutions are also supposed to exercise?
A lot of it “went with the wind”, as evidenced by the enthusiasm with which funds poured money into tech stocks, those listed on Wall Street especially. As a result, US tech stocks plunged by a dramatic 33 per cent from peak to trough last year, nearly double the overall market fall.