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Stock prices will always be volatile. Every form of media extensively covers the stock market. As a result, stock prices are influenced by all major events, whether they are political, social, or economic. Elections, earthquakes, terrorists, unemployment, assassinations, foreign affairs, the dollar, war, peace, and much more: All send stock prices up and down.

During bubbles, extensive media coverage will lead you to be overconfident in your ability to pick stocks. If you are caught up in the herd hysteria, you may even reach a sense of grandiosity, believing yourself an investment genius. Addiction can take over as you constantly seek the high of easy money.

A sudden drop in stock prices triggers more troubling emotions. Some investors panic and sell everything. Panic is highly discouraged by those who make a living selling stocks. Investors who panic and sell out often feel guilty that they went against the advice of investment professionals. However, panic is the clearest sign that stocks are outside your comfort zone. A good panic can save you decades of trouble. Investors who panicked and sold in 1929 got over the guilt and had no regrets for the next 21 years.

Investors who panicked in 1966, 1970, and 1974 got over the guilt and had no regrets until the mid-1980s.

The following types of countries are most likely to be at risk (this is a selection of indicators):

• Countries with significant exports to crisis affected countries such as the USA and EU countries (either directly or indirectly). Mexico is a good example;
• Countries exporting products whose prices are affected or products with high income elasticities. Zambia would eventually be hit by lower copper prices, and the tourism sector in Caribbean and African countries will be hit;
• Countries dependent on remittances. With fewer bonuses, Indian workers in the city of London, for example, will have less to remit. There will be fewer migrants coming into the UK and other developed countries, where attitudes might harden and job opportunities become more scarce;
• Countries heavily dependent on FDI, portfolio and DFI finance to address their current account problems (e.g. South Africa cannot afford to reduce its interest rate, and it has already missed some important FDI deals);
• Countries with sophisticated stock markets and banking sectors with weakly regulated markets for securities;
• Countries with a high current account deficit with pressures on exchange rates and inflation rates. South Africa cannot afford to reduce interest rates as it needs to attract investment to address its current account deficit. India has seen a devaluation as well as high inflation. Import values in other countries have already weakened the current account;
• Countries with high government deficits. For example, India has a weak fiscal position which means that they cannot put schemes in place;
• Countries dependent on aid.