Dave Kennon: Is the Dow Jones Going to Drop Over 50% This Year?

-50% Dave Kennon

Dave Kennon, Kennon Financial

 

Recently I have seen more scary headlines concerning the markets than usual.  I sometimes literally yell out loud, “How are people even allowed to publish this stuff- let alone why it is showing up at the top of my news-feed?!”

This is not a victimless crime.  I can’t tell you how many people let these kinds of headlines force them into making emotionally charged investment decisions.

Emotion + Investment Decisions = Not a Good Idea

It also causes untold worry and stress on the millions of readers who are depending on stocks and bonds to fund their retirement years.

Here’s a couple of the most egregious offenders.

We’ll start with an article from Marketwatch.com titled:

“Prepare for the biggest stock-market selloff in months, Morgan Stanley warns.”

Why This Drives Me Nuts

  1. Nobody knows when the stock market is going to go up or down.  I can’t state this any more clearly: There is zero academic evidence that there has ever been a single person who could consistently predict when the stock market is going up or down.
  1. Morgan Stanley is a big name in the investment industry.  Using their name makes the article even scarier because it sounds like it is coming from a reputable source.
  1. There are lots and lots of prognosticators out there, but the bottom line is this:  a long-term, diversified portfolio of stocks and bonds is a time-tested and powerful tool to grow wealth.
  1. The article pulled out one negative prognostication from a rather lengthy report by Morgan Stanley.  The website is using a “clickbait” strategy whereby they use whatever headline is going to get the most clicks- whether the headline is accurate or not.

The exact quote they are basing the story off of is:  “The bottom line for us is that we think the selling has just begun and the correction will be the biggest since the one we experienced in February.”   (The markets were down a little in February but came right back up.)

Could stocks go down 10% again?  Sure. It is a natural part of the markets.  But it has no bearing on your long-term financial security.  It is about time IN the market, not TIMING the markets.

Let’s move on to the second article (also from Marketwatch.com):

“This ‘prophet of doom’ predicts stock market will plunge more than 50%”

Why This Drives Me Nuts

  1. Anytime the word “doom” is in the title of an article, you may want to take it with a grain of salt.
  1. The “prophet of doom” runs a mutual fund.  He gets paid based on how many people buy his mutual fund.  The more he can get his name in the news, the more attention he gets, and the more investors he recruits.
  1. The “prophet of doom” has been predicting a historic crash every year for the past 18 years.   He was “right” two times, and now he is “famous” for “predicting” the crashes in 2001 and 2008.  Really?!
  1. If you followed this guys advice you would have put all of your money, in cash, in a hole, in your backyard.  If you had $100,000 in 2000, you would have $100,000 in 2018. Do you know how much money you would have if the money had been invested in the S&P 500?  $100,000 invested in the year 2000 would be worth $264,000 today. (source)
  1. The article uses lots of technical looking charts and graphs- all of which have been proven to be completely ineffective at predicting the stock market.  But to the uninformed reader, they appear to give a lot of credibility to the idea.
  1. He is predicting that the Dow will drop 69%.  If they Dow dropped 69% it would far worse than the Great Depression!  Really?!?!?!

Ok, I better wrap this up before I get too fired up.

Online newspapers sell advertising.  The more people that read the article, the more money the newspaper makes.  Newspapers will write any headline possible to get your attention. Unfortunately, the media learned long ago that doom and gloom gets a lot more “clicks” than sensible financial news coverage.

Ignore.  These. Articles.

Be Blessed,

Dave Kennon, Kennon Financial

 

 

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