I would be the first to accept the financial services media gets it wrong. Indeed, I hope I am not in breach of contract by admitting that the “end of year/end of month/end of anything” prediction articles we (as journalists) write must be taken with a large pinch of salt.
Perhaps the fact that the future is fundamentally uncertain is one of the many things that keeps us wedded to dramatising current events themselves. And then there's the behavioural bit: bad news sells better than good, and people feel losses more acutely than gains. The fear factor is real. News outlets know this.
As such, I’d happily field the argument that headlines alerting readers to market dips and troughs of any kind might come across as alarmist, and that – consequently – this “noisy” approach makes it harder for readers to distinguish between a bad day and a genuine catastrophe. Only when there is an actual fire is it time to break the glass. Markets go up, markets go down. Change the record. Hold your horses with the hose there.
As I'm alluding to, it’s important to keep a cool head. Perhaps that’s why I get equally irked by commentators asking why media headlines fail to celebrate the many billions that get “wiped onto” the stock market every time traders end the day in the green. For one, there are headlines about that (more below). But the point is this.
For all their positivity (and I do appreciate positivity) it seems hypocritical to argue that, having told investors not to give into their own emotions, they should somehow be celebratory about short periods in which good things happen. What matters is the trend.
But there’s another reason why they irritate me. This whole investing game isn’t a party – and nor is it a work event for many people either. If you read certain proclamations on Twitter by professional commentators who should know better, you could be forgiven for thinking it is. This is overconfidence, and it absolutely stinks. You will hear them say (very, very rightly) that patience is a virtue, but patience is also a matter of privilege. Some people can afford to be patient. Your circumstances may be different to theirs.
At every major market dislocation, investors have learned something about their assumptions and core beliefs that was wrong. It will happen at the next crash, and at the next one, and, if I may say so, at the next one. To be an investor is to submit to that learning with humility. I say this with real honesty. It has happened to me. I believed one fund manager when he (and it was a he) proclaimed in February 2020 that the coronavirus crisis was but a little local difficulty no more significant than SARS.
So what am I trying to say here? Well, first of all, beware overconfidence of any kind, naturally. But secondly, know where to break the chain.
You may agree that not enough effort is made to draw attention to the stock market’s successes on those good days. But that does not necessarily mean that you must subscribe to everything proponents of that argument say. Many of that school of thought’s acolytes say selling in a downturn or crisis is always wrong. As my US colleague Christine Benz this week points out, there are certain very specific circumstances in which it may be a good idea to do that.
Finally, let’s address that point about supposedly-absent celebratory headlines. There are plenty of headlines of this nature, actually, and, in my view, they risk an even more dangerous outcome: ignorance of the real economy. There is a reason why Trump spent his entire presidency bleating on about how brilliantly the stock market was doing (though, ironically, the stock market tended to fall on days when he tweeted a lot). Frankly and sadly, that’s more than enough confidence for me.
Fail to appreciate the cosmetic nature of these arguments, and you really do risk having the smile wiped from your face.
Ollie Smith is UK editor at Morningstar
