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| Pathways Advisory Group, Inc. Jeff Karst, CFP® |
Often times
when I read the headlines, I get a chuckle.
Of course, their intention is to grab your attention. The more people that “click” on their
article, the more advertising they can sell.
It’s not about education for them.
With a bit of volatility to end 2018, it was prime time for the media. We’ve
seen the same within the last few weeks. Here is my (not so) definitive guide
to interpreting the headlines.
“Stocks Clawed Back to Positive Territory”
Basically,
stocks should be going down and the only way they were able to make it positive
for the day was through sheer grit. Much
the same way a zombie climbs out of the grave.
“Stock Sell-Off Intensifies”
You can
replace “Intensifies” with any word you like (to make the headline more
attention grabbing). The media always
uses the phrase “sell-off”. As if, by
some miracle, stocks are sold and no one buys them.
For any stock
to be sold, there must be a buyer on the other end of the transaction. If there were no buyer, the stock could not
be sold. For every seller that believes now is the time to sell, there’s a
willing buyer that believes now is the time to buy. “It takes two,” as they
say.
“Markets in Turmoil amid _________ fears”
This usually
means that one of the major stock indices have dipped slightly in value, often
by 2-3%. It’s often coupled with some impending doom for the economy, stocks,
or both. Based on this headline alone, you’d guess markets are down 35% for the
year. What’s often missed is that – although they dipped for the day – stocks
might actually have strong positive performance for the whole year.
This is the
case in 2019. The S&P 500 (+16.73%), Russell 2000 (+11.7%), and all but a
few international indices are positive year-to-date despite the recent
“turmoil”. Beyond one year, these dips tend to be short-lived compared to the
overall long-term growth of stocks around the world.
We have no
clue how the year will end. But as Evon wrote in his blog post, Perspective During “Turmoil”, “It’s amazing what perspective
can do when faced with one day’s dramatic event. Taking a step back gives us
the opportunity to evaluate what’s really going on and not overreact.”
“XYZ Company Earnings Missed Expectations”
How does the
company miss expectations? Wouldn’t they
want to always exceed expectations to, you know, make more money? Perhaps the real answer is, the analysts were
wrong. The media doesn’t want to say
that. That would mean that the
prognosticators aren’t actually able to see the future.
“It’s tough
to make predictions, especially about the future.” – Yogi Berra
Focus on Your Goals
It’s hard to
ignore these headlines given what we experienced in the 4th quarter
of 2018 or in the past few weeks. It’s human nature to be affected by the
short-term news flashes. We must remember what the long-term trend of stocks
has been. If your goals are long-term, then your focus should be too.
Lastly, focus
on the things that are within your control. We can’t control the ups and downs
of the markets, let alone guess where they’re heading next. We also can’t
control what the news writes about it. Instead, focus on the amount you invest,
the amount of each type of asset you hold (stocks, bonds, and real estate), the
expenses you pay, and the taxes you owe. Therein lie the keys to your success!
Note:
All returns data are as of writing, 08/19/2019. The data very well may have
changed by the time you read this
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