Stupid question: why do people love stockmarket crashes so much?

Adam

Summary:

People fixate on market crashes because fear is more powerful than calm gains. Media incentives, loss aversion, doomsayer validation, and schadenfreude make downturns dramatic, attention-grabbing events compared to quiet rallies.

The appetite for downturns rests on a mix of emotions, media reflexes and attention (and money) gains for those who make a living from financial commentary. This cocktail explains why a red day always draws more attention than a calm, or even not-so-calm, upswing.

Falls always make for a better story. There is tension, drama, culprits, victims. Nobody is interested in a 0.7% gain, while a 5% loss mobilizes everyone. The media know it: red alerts trigger clicks. This is not a conspiracy, it is biology. Kahneman and Tversky theorized this brutal asymmetry: the pain of losing €1,000 is psychologically twice as intense as the pleasure of winning the same amount. Our reptilian brain is wired for survival, not serenity. A green arrow is information, a red arrow is a life-threatening danger. Threats always take priority. And fear sells, and not just shares.

Sell everything

A bull market reassures, a bear market worries, and therefore engages. When indices plunge, news channels see their audiences surge, analysts are listened to more closely, experts are in higher demand, defensive products are bought in greater numbers. On MarketScreener, in-depth analysis pieces are read far more. With aggressive headlines, their audience can even multiply tenfold. "The market is falling" works well. But less well than "The stock market is collapsing". Which is less effective than "Huge stockmarket crash on Wall Street" or "Sell everything, the market is going to lose 50%". A downturn is a moment of frantic consumption of content, advice, opinions. Everyone has something to say. Especially those who have been calling for a meltdown for years.

Because every correction becomes an opportunity to replay the crash prediction. Some people are just waiting for that: for the market to finally tumble so they can say "I told you so". They make a lot of noise when markets fall, then disappear during the recovery phases. Their narrative survives only in moments of urgency and delivers catastrophic results over the long term.

I remember a panel discussion a few years ago. On my right sat an economist known for having started out in investment banking before making his money out of catastrophism (yes, that one). It is still his bread and butter today, thanks to a community whose size has mysteriously swelled over the years. Back then, already known for predicting all sorts of looming cataclysms, he boasted that he had avoided losing money for those who listened to him. A fund manager sitting opposite him, whose name I have forgotten, replied icily: "By encouraging them to stay out of the market for 15 years, sir, you have mostly cost them a lot of money."

A healthy dose of Schadenfreude

We also have to admit that many of those who revel in a downturn don(t have a penny in the market. Their relationship with the market is ideological or purely about spectacle. They see finance as an opaque, unfair or simply distant system. For them, a stockmarket decline is like a disaster movie: a show, not a loss. It is even a form of revenge against a world they do not belong to. There is, in this voyeurism, a dose of Schadenfreude, that guilty pleasure at other people's misfortune. When the market rises, the rich get richer and inequalities widen. When it collapses, everything is levelled. Watching "those at the top" panic provides a sense of rough justice, a kind of egalitarianism by way of emptiness. For the spectator, the crash is not a financial loss, it is a moral reward.

Finally, fear is contagious. During sell-offs, even outsiders are glued to the screens. Humans are wired to react to danger, and the media know how to play on this archaic reflex. It is also a platform for players who gain little from rising markets. It offers a window to short-sellers, crisis commentators, political parties predicting systemic collapse, or those who want to prove that "finance does not work".

This is not rational, it is human. That is why markets in the red always make more noise than those in the green.

Source: marketscreener

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