DON’T LET HEADLINES DERAIL YOUR INVESTMENTS
Overreacting to unsettling news by making rash decisions could hurt bottom line
President Trump firing the FBI chief and its comparison to Watergate. North Korea and nukes. Trump’s stalled eco- nomic agenda. Brexit and the threat to the European Union.
While the fire hose of unsettling news runs 24/ 7 on cable news and social media, not all of it has what it takes to tank stock markets. And that’s why investors must be careful not to overreact to the crisis of the day, Wall Street pros say.
“STOP watching TV,” says Brian Bel- ski, chief investment strategist at BMO Capital Markets. “Fear sells, and investors and the media are way too shortterm focused.”
Adds Alan Skrainka, chief investment officer at Cornerstone Wealth Management: “Listening to the 6 o’clock news
gets investors off track.”
Take some of the recent nerve- racking headlines and the false alarms they set off. The market was supposed to crash after Brexit last June. It didn’t. It was supposed to take a big hit when President Trump was elected. It didn’t. It was supposed to crater when the Fed started raising rates. It didn’t.
Instead, stocks kept rising. The Dow Jones industrial average is 14% higher than on the day Trump won the White House, despite predictions that his win and unpredictable style would sink markets. And the recent flap in Washington over the firing of FBI director James Comey has caused a 0.3% retreat.
Due to intense competition and “the desire to stand out,” Skrainka says, media coverage has become “more and more shocking,” which often creates “unsupported hysteria.”
The risk for investors is making rash buy- and- sell investment decisions based on unexpected headlines.
“You can be scared out of the market when you should stay in, or lured in when you should be cautious,” says Brad McMillan, chief investment officer at Commonwealth Financial Network.
What news, then, is worth getting worked up over when it comes to your nest egg? News that hints at real trouble in the economy, such as headlines in 2008 during the financial crisis that identified major credit problems at the nation’s biggest banks.
“Any news that causes a loss of confidence in the economy or the institutions that influence it can potentially hurt the markets,” says Bill Hornbarger, chief investment officer at money management firm Moneta Group. “I would not include in that category,” he adds, “the president firing a senior adviser or someone being dragged off a plane ( like the United Airlines incident).”