What did market do today? Don’t ask talking heads
Anyone who has read this column over the last eight years knows I am no fan of the financial media.
Most of the information they provide is of little or no value to the average investor. This is especially true when it comes to explaining daily stock-market movement.
Over the years, investors have been conditioned by Wall Street and the financial media to believe that stocks move up and down for identifiable reasons.
On any given day, there are usually a few positive and a few negative news stories that can be spun to explain the market’s movement. Whatever direction the market happens to move, the financial media simply fill in the blank — “The stock market is up or down today because ..” — with one of those positive or negative news stories to explain the market’s movement.
The financial media provides these ridiculous explanations not because they really know what caused the market to move, but because they know that’s what investors want to hear.
It’s in the financial media’s best interest to convince investors that keeping up with their insight about the economy and the stock market is essential for achieving their financial goals.
It would be unthinkable for the cable business channels to simply report how much the market went up or down each day without having some “stock-market expert” providing their insight.
What about on those slow news days when there are no big stories or events?
Since you are portrayed as an expert on the market, you have to say something. You can’t admit the truth and say, “I don’t know.” Imagine if a guest on CNBC made the following comment: “I don’t know what caused the market to move today.” How many times do you think he or she would be invited back?
Not to worry.
There are all sorts of clichés, explanations and catchphrases the investment industry has come up with for those slow news days. The following are a few of my personal favorites:
: “Stocks are down on profit-taking.”
: “Stocks are up on bargain-hunting.”
: “The market is taking a breather.”
: “We’re cautiously optimistic.”
: “We’re taking a waitand-see approach.”
: “We’re waiting for more certainty.”
: “There’s lots of cash sitting on the sidelines.”
: “The smart money is ...”
: “It’s already priced into the market.”
: “There are more buyers than sellers.”
: “The market is overbought.”
The truth is that all of the daily stock-market analysis provided by the financial media and investment industry should come with the following disclaimer: “We really don’t know what caused the market to move today, but we must come up some reason. If we don’t, you have no reason to keep reading, listening or watching.”
Martin Krikorian is president of Capital Wealth Management, a registered investment adviser providing feeonly investment management services located, at 9 Billerica Road, Chelmsford. He can be reached at 978244-9254, www.capitalwealthmngt. com, or via email at info@capitalwealthmngt .com.