In the media world there is a saying: “Bad news sells”. If that is the case, then the financial media sure knows how to sell! A quick online search shows how pessimistic headlines dominate, even as things improve. Here are some examples:
“Stocks ‘Overvalued By At Least 20%’” – Oct. 2009
“Double-Dip Recession a Foregone Conclusion…” – Oct. 2011
“Nobel Prize winner warns of US stock market bubble” – Dec. 2013
“According To Many Famous Investors, U.S. Stocks Are in a Bubble” – Jan. 2014
“We’re in the third biggest stock bubble in U.S. history” – July 2014
“[Expert] on Brexit: ‘Worse than any bear market you’ve seen in your lifetime’” – June 2016
Eventually, one of these negative prognosticators will actually be right, bad markets do happen every once in a while. And when they are finally right, nobody remembers all of the times they were wrong and holds them up as a guru, maybe even leading to a large book deal.
Being pessimistic about the future may even make you seem more intelligent as author Matt Ridley puts it in his book The Rational Optimist:
If you say the world has been getting better you may get away with being called naïve and insensitive. If you say the world is going to go on getting better, you are considered embarrassingly mad. If, on the other hand, you say catastrophe is imminent, you may expect a McArthur genius award or even the Nobel Peace Prize.
In reality, no one (not even the genius economists) knows for sure what will take place in the markets in the next year. Any prediction is one of speculation and should not dictate how we adapt our investment strategy. Instead, your investment approach should be designed around your unique situation. How much investment risk do you need to take to accomplish your goals? How much volatility can you withstand while still maintaining a long-term strategy? These are the types of factors (and others) that should dictate one’s investment policy, not the “talking heads”. As FDR famously said: “The only thing we have to fear is fear itself.” There will always be some scary headline out there, but the best defense for short-term noise is a long-term mindset.
Disclaimer: The views contained in this article are those of the author and should not be construed as personalized investment advice. All economic and performance information is historical and not indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from Keeler & Nadler or from any other investment professional. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, you are encouraged to consult with the professional advisor of your choosing.