Why are the markets so volatile?

Think of how you behave when you are uncertain or under threat. It's very hard to retain a sense of perspective. If you are a family or a football team under pressure, you may well become a little paranoid about your team members, and super-touchy about each event in the outside world. Think how your heart jumps when you are anxious and your mobile phone rings. Irrational, but understandable.

There is a strong urge at the moment to do what the group is doing, to hide behind everyone else's combined opinion. But investors, as a group, are not necessarily being particularly rational. A number of companies, which provide essentials such as food, are reasonably financially healthy, and may survive quite well. Yet their shares are still lower than reason would expect, because we cannot get rid of an overall sense of fear.

Some investors may soon choose to step across the line and decide which companies have a good future after all. They may make some money by getting in early. But this is not investment advice. Make your own decision!