Fake News? No, Just Headlines After Your Eyeballs


Despite the first thing you probably thought of when you saw the title of this post, this is not a political article. While I am a self-admitted news junkie and very interested in politics, this post is about the damage that headlines can cause to your investment portfolio—if you allow them to.Over the last week, I’ve captured some of the headlines that have appeared in major financial publications and websites. While I am sure that the writers of these articles do not intend to bring financial harm to their readers, the possibility of doing so exists.

First and foremost, we need to remember that a financial newspaper, magazine, or website has one main goal: to capture your eyeballs. The more people who view their publications or site, the more they make from their advertisers. When they publish an article with an attention-getting headline, they are trying to draw you in. They do so with scary headlines about why the financial markets are about to crash, or warnings that you better go “all in” soon or you’ll miss the next big bull run.

Before we go any further, it’s important to understand the perspective that I bring to the discussion. Our firm has long believed that any attempt to predict, or time, the markets is a waste of time and money. And the academic evidence supports our position. So, it is frustrating when I read articles that could lead investors to make decisions that hurt them.

I’m going to list several of the headlines that I’ve seen over the last week and try to provide a little perspective. I think it’s important to do so, especially when I see a headline like this: “Half of Americans See Market Swings as an Opportunity to Cash In.” This article says that 48% of Americans see volatility in the markets as a chance to get rich quick. That approach is gambling—not investing. However, the article does include a quote from Greg Anton, a CPA and chairman of the AICPA's National CPA Financial Literacy Commission, that puts things in perspective: "Investing is not a get-rich-quick scheme and trying to time a volatile market with hopes for huge gains is a serious financial risk." Truer words have hardly ever been spoken.


We’ll begin our look at some of the headlines with the ones that are calling for Armageddon in the markets. “Behold the ‘Scariest Chart’ for the Stock Market” is a pretty technical article that highlights similarities between 2018 and 2000, the year of the tech-wreck in the markets. It’s difficult to look at the chart presented and not see the similarities, but that doesn’t mean it’s going to play out the same way moving forward. A lot has changed since 2000. The writer of the article “A Duo of Factors Signal That a Stock-Market Downturn May Be at Hand” is at least coy enough to use the word “may” in the headline. This article is another technical one about some market indicators that could be looked at as data mining, or selecting the data that helps “prove” a point. With enough data, you can make the indicators say almost anything you want them to. Another article on the same subject uses a much scarier headline, “A Bearish Market Warning from the Tech Bubble Is Back.”

This article, “Market Bull Braces for 5-10 Percent Pullback, Sees Compelling Reasons to Buy the Dip,” says that a slight pullback in the market is “conceivable.” Really? Of course, it is conceivable! Five to ten percent is not even considered a market correction.

This Chart Says Stocks Are About to Run Out of Gas in a Big Way” compares the chart of the S&P 500 with the index for silver. I don’t understand the connection, but at least the author hedges his bets by saying, “We are in the slower summer months, and price moves are more likely to reverse than continue.” (My emphasis.)

How to Predict the Next Market Downturnacknowledges that predicting the market is a fool’s errand, but goes on to let readers know about the tool the publication has developed to help do so.


Of course, it’s not always gloom-and-doom predictions. “Stocks to Pop Another 10% or More from Here, Despite Trade War, Rising Rates” predicts that stocks will rise and that any pullback should be used as a buying opportunity. No wonder investing can be confusing.

Here’s another: “Obscure Market Statistic Could Point to Record Highs for S&P 500 by Year-End.” This article points out that the S&P 500 was higher in April, May, June, and July. That has happened only 10 times since 1950, and the market moved higher by year end all 10 times. That is pretty obscure. Not something I would recommend betting on.

This article, “Traders Are Expecting a Big Stock Market Soon,” doesn’t say that stocks will move higher or lower, just that they are set for a big move. Well, that’s not very helpful.

I’ve attempted to use a little humor to illustrate the mixed signals we are all subject to and how difficult it is to predict how the financial markets will move. The above articles represent only a fraction of those written by the so-called “expert” market prognosticators. If you pay attention, you might notice that there seems to be a lot more articles written about the coming fall in the markets than the possibility of a rally. Remember why they write the headlines. They want your eyeballs. And fear sells.