We’ve tried to warn people in the past about what happens when the market goes down. The financial media treats it like a 5-year old on Christmas morning. There is nothing better for CNBC’s ratings than a giant drop in the stock market. It’s on those days everyone wants to tune in and learn why their 401(k) went down. And they are happy to tell you exactly why the market dropped. But today, using CNBC’s own headlines as an example, we’ll show you just how stupid the financial media can be.
CNBC contradicts itself
After the market dropped almost 1% on Tuesday, September 24th, CNBC ran the following post-market headline:
The takeaway is simple: CNBC is leading readers to believe that the stock market fell because President Trump might get impeached. Yet, on the very next day, after the stock market went up, CNBC offered the following headline:
Here CNBC is telling us that the market went up because of President Trump’s indication that he might make a deal with China to end the long-running Trade War. But let’s think about this logically from the perspective CNBC has given us. Remember, on Tuesday they were warning us that the President might be impeached, and this is a negative for markets. Yet, by Wednesday, CNBC tells us the market is higher because the President may sign a deal with China.
The headlines don’t make any sense
My question to CNBC is this: how is it the market can fall because of concerns the President will be impeached but then rise on hopes of policy actions to be taken by that same President? That makes zero sense. But of course, this isn’t CNBC’s fault. They are just doing their stated job of providing “real-time financial market coverage and business information” to people around the country.
If you look at the market in real-time, many things won’t make sense. That’s why when outlets like CNBC are tasked with explaining these “real-time” market events, they often look silly from one day to the next. Watching the market too closely is akin to standing too close to an abstract painting. To make more sense of the painting, back up a few steps and see if you get a different perspective.
Don’t invest based on headlines
The bottom line is that the financial media will always try to explain everything as an up to the second analysis. But we’re not investing for seconds. So be careful about the headline of the day. Consider consuming your financial news on a weekly or monthly basis so as not to get too caught up in the day-to-day action. Most of the time, you’ll see the headlines really don’t make much sense. So don’t let them drive your investment decisions.