The Myth of Headlines
Headlines!
The headlines blare that interest rates are going down. Then the next day an employment report comes out and the implication is that interest rates are going up. Another day the headline says 10-year Treasury breaks the 4% level going down. A later headline talks about how the 10-year Treasury has now broken the 4% level going up! So confusing! What’s going on?
How Headlines Work
There’s a term in the media called “feed the monster”. This is a term that essentially outlines the need for the media to generate content on an ongoing basis. This means that small movements in the market or economy are worthy subjects that help fill today’s headlines.
While it’s important to look at data on the short term, long-term trend analysis is what is key. This is not always easy when reading media.
There is a tremendous demand for the right answer, the quick answer, the guaranteed answer, and the truth of the matter is this: no one really has the answers. All we have to work with is probabilities.
Make Your Own Judgments
Probabilities can be impacted by sentiment. In the financial world, sentiment is significantly driven by media stories. The same website that talks about an imminent recession could very well next week talk about the upcoming economic growth spurt. There are thousands of opinions that hit the headlines and what is important for investors is to recognize that just because you read it, that doesn’t make it true.
DWM Process
As I read and absorb headlines (which I do for hours every day), I’m assessing the rationale for why the opinion is developed and generating my own perspective that will help us drive portfolios moving forward. Blindly following the headlines is probably not the best strategy. We believe it’s important to make our own judgments. We do this together as a team, I’m the head of the Investment Policy Committee, Craig Gentry, is our Chief Investment Strategist, and we have our Research and Trading Teams. Our analyses as a group form the foundation of how we invest portfolio strategies.
So…. when you read the news, understand headlines are not necessarily truth. Understand who wrote it, the rationale behind the article, and the intellectual underpinnings of the argument. A perspective based on thoughtful analysis resists blindly believing what is written is best in today’s complicated investment environment.
