Market Bubble Set to Burst
Did this headline scare you? Did it make you want to read this article? Not to worry, there is no reason to think the Dow is going into a free-fall. I made up the title. I’m really sorry I spooked you. I’m just trying to make a point.
Recently I have seen more scary headlines than usual concerning the markets. I’ve found myself literally yelling 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 victim-less crime. I can’t tell you how many people like you let these 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.
I did some digging and re-read articles from 2018. The results prove my point. It’s kind of funny in a sad way.
So let’s take a step back into 2018 and see what the prognosticators were prognosticating.
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:
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.
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.
The website is using a “click-bait” strategy. The owners of the website do whatever it takes for you to visit, so that they can display ads, so they can make money.
Could stocks go down? 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.
By the way, did the stock market “correct” itself back in 2018-19? No. It went up 30% in 2019. I hope you didn’t read that article and sell your portfolio. If so, you may want to email the author and ask for your money back.
This is the problem. News outlets and writers take no risk when writing this stuff. If they’re wrong, who cares? At least they found content to fill the pages. If they’re right? Now they tout their incredible research skills.
Let’s move on to the second article. Also from Marketwatch.com. Also from 2018.
“This ‘prophet of doom’ predicts stock market will plunge more than 50%”
Why This Drives Me Nuts:
Anytime the word “doom” is in the title of an article, you may want to take it with a grain of salt.
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.
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 being a “prophet” because he predicted the corrections in 2001 and 2008. Really?!
If you followed this guys advice, out of terror, you might have buried your money in a safe in your backyard under concrete. In this scenario, $100,000 in 2000, would be $100,000 in 2018. Do you know how much money you lost out on? $100,000 invested in the year 2000 would be worth $323,000 today. (source)
The article also 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.
He is predicting that the Dow will drop 69%. If the Dow dropped 69% it would spur on another Great Depression! Really?!?!?!
Ok, I better wrap this up before I get too fired up.
Online newspapers sell advertising. The more people who 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.