Ben Carlson has a fantastic (easy to digest) explanation piece titled ‘Why Doesn’t The Stock Market Care About News‘.
Every point Ben makes I agree with. For instance:
Markets don’t care who the president is. People may not like to hear this but it’s true. Investors care about earnings, interest rates, trends, and sentiment. The stock market and the economy are bigger than any one person or one administration.
Last week Trump said, “I’ll tell you what, if I ever got impeached, I think the market would crash.”
The market could always crash but I’m guessing it wouldn’t be caused by this.
Stocks were up almost 30% in 1998 during the impeachment proceedings for Bill Clinton. They rose another 21% in 1999. Stocks fell 23% after Richard Nixon resigned from office in 1973. The difference is stocks were already going up in the 90s and already going down in the 70s so in both cases they simply continued doing what they were already doing.
Ideology has no place in the markets.
To end, Ben was also on point:
The economy is still humming along. I have a theory that nothing is properly rated anymore because of the Internet. Everyone has an opinion about everything and it’s caused people to think in terms of extremes. Everything is black or white, right or wrong, left or right, etc.
We haven’t had economic extremes during this recovery. The progress has been gradual so anyone predicting a rocketship to the moon or a terrifying crash has been wrong. Gradual good news doesn’t play well in the headlines but it’s been there nonetheless.
Things are far from perfect but the markets don’t care about good or bad; they care about better or worse. And things continue to get better as a whole with the economy.
Eventually excesses will build and we’ll have a sustained downturn. But you won’t hear about it ahead of time in the news.
Investing is NEVER easy, but if you can focus on how Ben thinks about news, which is how I try to think about news, investing should get a slight bit easier and definitely less complicated.
I also like what my friend Ben Hunt says about headlines and news:
Whenever you read the WSJ, FT or Bloomberg, ask yourself “Why am I seeing this story ?“
For example, remember yesterday I used the example of all the death of retail and mall headlines in 2016 which were a fantastic time to buy an index of retailers and ecommerce companies.
If you want to be a great investor, a constant curation of who you follow will make you more money with less stress, time and aggravation than trying to be the first to find and act on news or tips. The good people just have a sense for where the money is going to flow. The good stocks (all time price high list) confirm this idea in the public markets at scale.
The rest of the time you can focus on your risk management.
Hopefully this brings some more profits and joy to your investing so you can focus on your family and career.
Also published on Medium.