I’m sitting here looking over the markets and how they’ve performed since November and I am not very surprised. Honestly, I wasn’t sure what the market would do after the election and I just called it a crapshoot. The political noise was too overwhelming in the final months before the presidential election and I simply had enough. In my house, I don’t even have cable so my news is delivered via several web sources… and I still tried hard to keep its exposure to a minimum.
In trading, many will tell you that the market news is just noise and that you should not lean on it for investment or trading decisions – and I agree 100%. Not only is it distracting, value-less noise, news is used to influence you and the markets.
We see it all of the time:
- Failing companies routinely pushing out press releases to temporarily pump the stock price
- Market pundits appear on TV to provide their opinions about the market, economy or a company
- Companies are profiled on CNBC with a promising future to increase investor awareness and demand for their stock, etc
Certainly I am not suggesting that you block out all news sources entirely. The most important thing is to understand what is fact and what is opinion. If I see a breaking news story about the CEO of a publicly-traded company being hauled away in cuffs for committing a crime, that will get my attention and I will investigate further. On the other hand, a college finance professor’s bearish view about the US economy will not shift my view.
In the final month before the election, every major news source pushed news, analysis, subject matter expert interviews and panel discussions to scare you into thinking that the markets would essentially crash if Trump won. What’s worse is that their arguments lacked reason or proof that would support their claim. But that really doesn’t matter because the news networks can easily push a story or opinion (and headline) to the masses and it will be instantly consumed. CNBC has 2.5M Twitter followers. How many of those busy people just skim and absorb the feed headlines and never read the story? Those who do will walk away with the ‘news’ tucked away in the back of their head. Below are a few of the stories the media pushed out the month before the election.
- Citigroup: Trump win would cause immediate stock drop
- Here’s How Bad a Huge Hedge Fund Says Trump Could Be for the Stock Market
- Here’s How Much the Stock Market Could Plunge If Trump Becomes President
- CNBC: Bart Chilton: If Trump is elected president, it would be ‘exceedingly harmful’ to markets
- Trump or Clinton? Here’s who the market predicts will win
- Scared investors flock to cash like it’s 2001 again
- Economists: A Trump win would tank the markets
- Investors Think President Trump Would Make Them Poorer
Do you think seeing those headlines would influence your views at the end of the day? I think so. That is how the news influences you and the markets.
Right now you’re thinking, “Okay, so they were wrong. Big deal”. Their strategy did not work and frankly I think too many people saw through all of their BS. Their goal was to instill fear in you and erode your confidence in the markets and political landscape. Are you surprised that the headlines, market sentiment and analyst opinions were wrong? I am certainly not.
While I can’t claim that the smart money knew how the election would turn out, I am certain they knew how to profit from it. To me, it’s all in the headlines.