Financial journalists love creating headlines that cause people to click or watch the latest epiphany they are sharing with the general public. Please remember that they are not paid to be correct, their goal is simply to get you to tune in.
From history, we know that these journalists have a track record of being wrong, especially at major turning points during economic and financial cycles. Let us begin our journey with the infamous Businessweek cover from August 1979, entitled The Death of Equities. This article posits that the stock market has been slain by rising inflation (sound familiar?), and has been left for dead, as you can see below.
Source: Bloomberg.com
Subsequent to this story, the stock market went on its longest bull market run ever from 1982-2000. During this 18-year run, the S&P 500 index went from below 200 to over 1400, more than a sevenfold increase. So much for The Death of Equities.
Source: Bigcharts.com
Fast forward to April 2019, and once again we see Businessweek declaring inflation dead. As anyone who has lived through the last two years knows, inflation is definitely not dead. It has risen from below 2%, where it spent most of the last dozen years or so since the Great Financial Crisis and subprime mortgage meltdown, to more than 9% in June ‘22.
Source: Real Investment Advice
You would think that today’s journalists would have learned their lesson, having seen their previous brethren get so much literary yolk on their collective faces from prior proclamations. You would be wrong. As you can see from last October, Barrons joined Businessweek in proclaiming that the US dollar won’t stop rising, as you can see below.
Source: AllStarCharts.com
However, if we look at a one-year chart of the dollar index, we can see that shortly after these bold proclamations, the dollar started falling and has lost approximately 10% of its value in just the last nine months.
Source: Bigcharts.com
We are not sharing the stories of literary failure just to bring ourselves joy, although I will admit, it brings me much joy to share them with you. It is to remind you that every time you hear economic and political pundits stating with certainty what will happen… they don’t really know. Therefore, you should turn off the TV or close your web browser and not emotionally react to the latest confidently stated headline.
For those of you, who want a real thought challenge when seeing headlines such as these, you could ask yourself the question “What would be the smart thing to do if they are wrong?” For example, if you thought the 1979 headline was wrong, you would naturally start buying equities while prices are low, therefore on sale. If they are wrong about the US dollar, you may consider increasing exposure to foreign assets, whose value goes up when the dollar falls.
Strategic thinking and questioning confidently laid out prognostications is what the CFPs of Impel Wealth Management are here to do on behalf of you, our trusted friends and clients. We are also here to talk with you should you have questions about your unique situation.
As we are enjoying the summer vacation months, we would encourage you to ignore most confidently stated headlines, and instead, enjoy life with your friends and family. We would all be happier, and we would have less stress in our lives, which in turn would allow us all to “Move Life Forward” in a more joyful way.
© 2023 Jesse Hurst
The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
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