While pondering topics this week for my final post of 2016, I’ve been inundated with periodicals, industry publications and online headlines full of projections about hot stocks, interest rates and where the overall market is headed in 2017.
I started linking stories above to make my point, but there are so many, it’s tough to choose just a few. Linking to one headline suggesting that the Dow is heading to 40,000 would show preference over a claim that it’s headed to 2,000. If you’re curious, search virtually any financial media site after you’re finished reading.
To pick on one story, Harry Dent made a terrifying prediction that the Dow could drop to as low as 2,000 in the year ahead. Yes, this is the same Harry Dent that predicted we would enter a depression in 2009 (we began one of the longest bull runs in market history). This was before he predicted the Dow would fall 30-50% in 2012 (it didn’t), but after he predicted it would hit 40,000 by 2010 (it didn’t).
Our feelings around prognosticating what’s to come in the financial world are well known to any regular reader of this blog. Again, I was planning on using a link to illustrate, but examples are too numerous to pick just one. If this is your first time to the blog, suffice it to say we generally find forecasting and fortune telling a fool’s errand.
That said, this seems to be a particularly important time to sound the alarm. Fake news is plaguing many of our online sources of media. This piece from NPR’s All Tech Considered was especially helpful in explaining how private citizens have built and profited from these fake journalism empires. This has not just been an exercise in attempting to influence politics. Fake stories have intersected with financial media and markets in a number of ways, including companies being mentioned in false stories that directly impact the short term performance of their stocks. As we’ve mentioned in the past, whether it’s cybersecurity or the source of the news you’re reading, vigilance is the key.
In addition to fake news, we’re also heading into a new political cycle. With an incoming President and cabinet who, regardless of political persuasion, are likely to increase uncertainty with little in the way of past political path to determine how they might proceed. That’s not to say things will go up, down, or stay the same. It’s simply to say that any headline or news article that includes a line to the effect of, “under President Trump, … is certain to occur” is blind guessing at best.
Even when we can verify a source, it is crucial to consider the motivation of these headlines and experts. Generally, you’ll see guesstimates coming from one of two sources.
As holiday travelers pass through newsstands en route to their holiday plans, what’s going to grab their attention? Headlines providing in-depth reporting on the past year? Stories on the uncertainty ahead and how to broadly diversify a portfolio to ensure long term success?
Instead, headlines like “Top 10 Stocks for 2017,” “Get Rich in the New Year,” or “Markets to Plunge in the Year Ahead,” are much more likely to grab our eye.
I didn’t mean to single out Harry Dent earlier in the blog. There are any number of soothsayers out there that battle every day for airtime on financial media airwaves. The network invites those willing to assert bold, attention grabbing picks much like the magazine covers described above. What are these experts typically getting in return? The opportunity to draw eyes to their newsletters, books or other publications promoting a slew of other bets. Sometimes they’re right and subscriptions or book deals surge. Sometimes they’re wrong and they lose face, lie low and go right back on the air to make another bold claim again until things pick up.
This is a profitable cycle for the financial media and these so-called experts. But, history and the track records of these prognosticators show that it can be a vicious one when betting retirement on their suggestions.
If these headlines suit your fancy in terms of entertainment or general interest, by all means, give them a read and consider the ramifications of all the guesses out there. It’s healthy to know what many different points of view are thinking about the road ahead. But, carefully consider the motivation behind the message.
Failing that, change the channel, watch one of the 50 or so bowl games over the next month or grab a different magazine off the rack.
Most of all, be present in these moments around the holidays and enjoy the time with family and friends. Ignore those spending all their time and energy trying to guess what’s to come.
Have a very happy holiday season and all the best as we begin the year ahead!