It’s a function of the perversity of the current system of market capitalism that measures designed to calm periodic storms can often help to whip them up.
Take the New York Stock Exchange’s “Rule 48”. It’s an arcane, and rather technical, measure that is imposed at the opening of the market with the aim of keeping a lid on turbulence.
The problem is that its very imposition can exacerbate the very panics it is supposed to nip in the bud. A case in point was Tuesday’s opening, during which traders took fright at the latest economic data from, you’ve guessed it, China. The Dow Jones and the S&P 500 plunged into the red but, as has become par for the course during the current interesting times, it wasn’t long before they started to recover some of their lost ground.
Perhaps people heeded the words of David Kelly, chief global strategist at JP Morgan Funds, who pointed out that while China has issues, it isn’t a particularly big driver for the US or for the earnings of US corporations.
Or perhaps the computer algorithms that run the show adjusted themselves. Or were adjusted. A tech guy might even have spilt some coffee on a computer, calling a halt to the sell-off. Stranger things have actually happened.
This is not the first the time Rule 48 has been invoked in the midst of the current crisis and, given the way things are going, we’re probably going to hear a lot more about it before the year is out.
