Magazine Headlines Deter Investors

Headlines Sell Magazines—But Do They Help You Invest?

If you followed your investing strategy based on the headlines of major news publications, you would not be blamed for never investing. News headlines can be overly negative because that is what sells.

As a former trader, we used to joke that you do the opposite of whatever is on the cover of the Economist. This is not to say that much of what is written is untrue, it is just lagging by weeks or months. The markets are forward-looking, while the news is stuck in the present.

Just for fun let’s look at a few headlines from the past:

“We want to get our money as far away from Bill & Hillary as we can”
Forbes Magazine, July 19, 1993
– This was the early stages of one of the biggest stock market bull runs in history.

“You may want to place up to 40% of your equity stake in technology”
Money Magazine, April 30, 1999
– The Dot com bubble burst soon after this.

“Obama’s Radicalism is Killing the Dow”
Wall Street Journal, March 6, 2009
– March 6th, 2009 was the bottom of the market and beginning of an 11-year bull run.

This leads me to the cover of the Economist on May 7th, 2020: A Dangerous Gap. The Market Vs. The Real Economy”

Maybe the Economist is right, maybe they’re not. But if you are invested with a long-term approach, does it really matter? Watching headlines is detrimental to long-term investing. Diversification and staying invested is the only way you can guarantee long-term wealth enhancement.

Economist

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