Don’t panic: This is how savers should react to the hustle and bustle on the stock market

Share prices are on a roller coaster, and there is great fear of a new financial crisis. Why investors should not lose their nerve anyway.

It was probably just too good to be true. In January, the stock markets conjured up the best start to the year in decades. After the difficult stock market year 2022, that was more than good for the battered investor soul. However, the burgeoning hope of falling inflation rates, fewer large increases in interest rates and even an absence of a recession fizzled out.

Inflation turned out to be more stubborn than expected, the central banks stuck to their restrictive monetary policy and the fear of an economic downturn was back. But it got even worse.

First the Silicon Valley Bank in the USA collapsed, then the struggling Credit Suisse, after all the second largest bank in Switzerland, had to be taken over by UBS. Collateral damage from the turnaround in interest rates? Or the start of a new banking crisis and, as a result, a financial crisis? Suddenly there was no longer just fear, but panic. Markets went down, and hard.

Panic on the stock market is rarely a good guide. If you panic, you are likely to make mistakes. If you lose your nerve, you might throw away your long-term strategy, maybe sell positions you actually believe in very strongly. Then ETF and fund savings plans are suddenly terminated, although there are currently many more shares for the money – actually a positive side effect of the price decline.

And then what? If you have sold everything or at least some in a hurry in the correction or even in the crash, the money is initially in the account. With a probability bordering on certainty, you will miss the re-entry. You will have found new confidence too late, then get back on more expensively. And you also paid two more order fees.

In the end, that’s probably a costly “pleasure.” When we stumble over emotional pitfalls on the stock market – and panic is a pretty big pitfall – it always costs money and thus returns. If you invest for the long term, then it is better to stay true to your strategy than to act hectically and therefore in the short term.

The stock markets will recover, also from the recent turbulence. Even if it goes further down again, the countermovement will start at some point. It has always been so and it will be so again. Unfortunately, sometimes it can take a while. This is another reason why it is so important to have a long-term investment horizon. It’s just not that easy not to let the current hustle and bustle on the stock markets drive you crazy.

Fear, at least doubts or a bad feeling most of them have right now. How big is the risk of a new banking crisis? This question is hotly debated. Nobody knows for sure, so the nervousness on the markets is correspondingly high. It is also about trust: trust in the financial system, trust in individual banks. That’s what makes it so difficult. When customers, like Silicon Valley Bank, withdraw money on a large scale because they lose trust, things can quickly get tight. Is this happening at more and more banks… You don’t want to spin the thought any further.

Speaking of banks: Incidentally, it was primarily the financial stocks that caused the indices to plummet. Other sectors have been less affected by the recent turbulence. At the beginning of the year, bank shares were still among the most sought-after stocks and were seen as the winners of the turnaround in interest rates. There is not much left of the big profits, on the contrary.

Despite all the turbulence, the Dax has been up almost ten percent since the beginning of the year, but Deutsche Bank is down around 14 percent. Although Commerzbank still manages to make a few percentage points of profit, it has lost a good fifth of its value in the past month alone. Before that, the youngest Dax climber had risen sharply. There’s not much left of that.