At ForexLive, we work in the news business and I make it our mission to deliver news and analysis that can help people make money in financial markets, or at least understand what’s going on.
I’ve always gravitated towards financial news because it’s the one industry where there’s a scorecard. You can still get away with lies for a time (probably for too long) but if the profits or jobs don’t materialize, then there’s a price to pay. Ultimately though, you get paid to be right and by having a worldview that reflects reality.
Unfortunately, long-term thinking (and investing) are in decline. All news is geared to stirring emotions now and the strongest emotions are fear and anger. I can tell you, it’s much easier to generate traffic with those kinds of stories and headlines. What’s happened in the past 15 years is that everyone else has figured that out.
Angry and scared people click and it’s created some kind of doom-loop dopamine fix that far too many people are addicted to.
There are consequences. I’m amazed — though not surprised — by this chart from Ben Carlson today showing deteriorating views of local and national economies but a steady view of personal finances.
There are many similar examples.
Objectively, we can see that US unemployment is at historically low levels and yet people are pessimistic. It’s not only in the US either, though I think the toxicity of US political news is particularly bad.
Carlson argues that this is mostly symptomatic of the volume of news that people are consuming. We used to read newspapers perhaps once a day or watch an hour of somewhat balanced TV news. Now it’s all day long and the algos serve up headlines designed to drive engagement. Nine times out of ten, the engagement bait is fear and anger.
That’s bad news for all of us and dangerous for investors. What happens when truly bad times come? Will there be violence?
For investors it’s a trap too. Stories predicting crashes get 10x the attention than those predicting booms and those predicting ongoing moderate gains are ignored completely. In investing, the big money is always in the holding and in letting winners ride. Every headline you read makes keeping a calm head that much harder.
It’s not all downside though. Fearmongering in the news can lead to overshoots to the downside in markets as well and that will continue to create opportunities for people who have hardened themselves to the fear-cycle. But I’ll warn: it’s much easier to be fearful when others are greedy than it is to be greedy when others are fearful.