Anecdotally, we have now had more than one private client call us to say something along these lines:
"I was afraid to open my statement, knowing that things must certainly be going off a cliff, and when I finally did look at it, I was surprised to discover that things were far better than I imagined!"
Why would clients be so afraid to look and so sure that everything is "going off a cliff"? No doubt this feeling is due to the constant barrage of negative news coverage served up by the financial media for the past three months. Of course, the vicious market sell-off that accompanied the initial crescendo of fear during the month of September and into the first few days of October didn't help either. However, clients are surprised to learn that major market indices such as the S&P 500 are actually positive for the year right now (see this page for S&P data, for instance).
The financial media has a tremendous bias towards accentuating a perceived crisis -- any crisis -- because they know that such reporting drives viewers to stop what they are doing and hang on every word out of the media talking heads. This trend has been going on for some time -- since the dot-com crash, in fact. Before that (back in the 1990s), the financial media took almost the opposite tack and attracted viewers by reporting with wild optimism. We believe this trend is extremely dangerous for investors, because it gives them a false view of reality. The anecdotal comments we are hearing from clients, described above, appears to support this conclusion.
The economic data, as well as corporate earnings at many businesses, tell a very different story. All sorts of measures indicate that the economy is not going off a cliff but is in fact growing modestly (some businesses, of course, are not growing, while others are growing quite rapidly, particularly if they are involved in certain industries that are undergoing major paradigm shifts).
We have been cautioning investors on the pages of this blog for some time now that the dire predictions of many media pundits and market commentators are overblown and overly pessimistic (see here and here for some examples). Pessimism is in vogue right now, and optimism is out of fashion. However, we believe it is very important for investors to tune out the financial media and focus on actual business measurements. In fact, we have always said that trying to time economic ups and downs is folly anyway and that investors should focus on business fundamentals rather than economic predictions.
Certainly economic growth could be much better than it has been in the almost three years since the 2008-2009 recession began to turn around, and growth has been hampered by a host of government intrusions and mis-steps that have hurt everyone. However, the constant flood of financial negativity that has been hitting citizens from virtually every angle lately has created a perception in most people's minds that is entirely different from reality.
This is a very important topic and deserves careful consideration.
"I was afraid to open my statement, knowing that things must certainly be going off a cliff, and when I finally did look at it, I was surprised to discover that things were far better than I imagined!"
Why would clients be so afraid to look and so sure that everything is "going off a cliff"? No doubt this feeling is due to the constant barrage of negative news coverage served up by the financial media for the past three months. Of course, the vicious market sell-off that accompanied the initial crescendo of fear during the month of September and into the first few days of October didn't help either. However, clients are surprised to learn that major market indices such as the S&P 500 are actually positive for the year right now (see this page for S&P data, for instance).
The financial media has a tremendous bias towards accentuating a perceived crisis -- any crisis -- because they know that such reporting drives viewers to stop what they are doing and hang on every word out of the media talking heads. This trend has been going on for some time -- since the dot-com crash, in fact. Before that (back in the 1990s), the financial media took almost the opposite tack and attracted viewers by reporting with wild optimism. We believe this trend is extremely dangerous for investors, because it gives them a false view of reality. The anecdotal comments we are hearing from clients, described above, appears to support this conclusion.
The economic data, as well as corporate earnings at many businesses, tell a very different story. All sorts of measures indicate that the economy is not going off a cliff but is in fact growing modestly (some businesses, of course, are not growing, while others are growing quite rapidly, particularly if they are involved in certain industries that are undergoing major paradigm shifts).
We have been cautioning investors on the pages of this blog for some time now that the dire predictions of many media pundits and market commentators are overblown and overly pessimistic (see here and here for some examples). Pessimism is in vogue right now, and optimism is out of fashion. However, we believe it is very important for investors to tune out the financial media and focus on actual business measurements. In fact, we have always said that trying to time economic ups and downs is folly anyway and that investors should focus on business fundamentals rather than economic predictions.
Certainly economic growth could be much better than it has been in the almost three years since the 2008-2009 recession began to turn around, and growth has been hampered by a host of government intrusions and mis-steps that have hurt everyone. However, the constant flood of financial negativity that has been hitting citizens from virtually every angle lately has created a perception in most people's minds that is entirely different from reality.
This is a very important topic and deserves careful consideration.
