Why Do Stock Markets Recover?

Stock markets recover because the professional investors are still holding the fort - the ones who know their stocks well.

When stock markets are about to crack, the professional investors will be the first to throw their shares in the markets - knowing that others will follow and those who throw last will lose the most because everybody panic.

But those who throw their shares first will be those who will have have cash to pick up the cheapest shares from the last ones who throw.

They only have to know that they do not pick up bad shares.

In this modern day and age, the government is unconstrained in the printing of money and is therefore inclined, in order to save its neck, to bail out companies that have been badly managed - in the name of protecting public interest and confidence.

The pouring in of money to bail out bad companies only prolong doomsday - but at least the hero is there to save the day, just for the day.

Banks, for example, are likely to be under-capitalised and therefore unlikely to have the capacity to engage in new lending. The day may be saved, but it does not mean that the economy will happily rebound and grow.

A lot of the recovery will be a lot of cash chasing a few good stocks while the economy struggles.

A lot of the mirage will be the focusing on stock market performances with government interventions and schemes, while real businesses struggle to make ends meet.

The day just drags on.