Hate to Be The Bearer of Good News
If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re mis-informed.
Most people wake up, start the day with a drink and check the news to keep updated on what is going on. Usually important headlines and events are delivered straight to your phone’s notification centre — urging you to click on them to read more. Do you find yourself feeling happy or stressed? Full of angst or peace? It is quite likely that your head would be filled with worries. For some reason, your eyeballs are more likely to be drawn to an article warning of crisis.
We conducted a very simple experiment where we took recent front pages of our local paper, The Straits Times, and a financial newspaper, The Financial Times, and highlighted news articles which were negative or worrying in red, neutral articles in grey, and feel good or happy articles in green. You can view the results below.
Apart from the odd feel good story here and there, it turns out that headlines are generally pretty worrisome all round. Why isn’t there more upbeat news?
It turns out that we are ones who want these types of articles. Academic studies show that the majority of negative news headlines is due to demand from readers. The study noted that the preference for negative information was likely subconscious, and readers usually found themselves selecting negative stories even as they stated their preference for other types of information.
In another study, a data scientist applied a technique called sentiment mining to global news over the past 30 years and showed that over time, news had indeed become more negative; in addition to portraying specific biases in the way the world was viewed.
Reading the news for information and facts is totally alright. However, it occasionally becomes hard to distinguish between fact and opinion in some articles, and when trying to base investment decisions on what you are hearing or reading, it becomes even more difficult.
Apple Stocks & Their Announcements
Do you know how markets will react to a particular piece of news? The example below on Apple’s stock price movements shows that there is no definitive pattern that can be observed. For example, the company had constantly been reporting positive earnings, and — except for the Jan 2015 announcement, which saw its share price spike — positive news didn't push the price upwards. It appears to defy common logic that positive earnings should produce an upward price movement in shares.
Netflix and Lose Your Chill
In a more recent example, Netflix shares collapsed -35% in April 2022 when it announced the loss of 200,000 subscribers. Sure, losing subscribers essentially means a future loss of revenue and profits which naturally meant that the share price of the media streaming company should come down. However, in its recent mid-July announcement of losing another 970,000 subscribers led to its share price popping over +20%. If they are losing even more subscribers than 3 months ago, shouldn’t the share price be tanking further?
On A Broader Note
In a similar vein, the recent Fed hike of another 0.75% led to global market rallies. The news was not consistent with how the markets reacted.
Most of the things in the news only seem important because they were happening “today” and commentators are trying to link seemingly unrelated events as “cause and effect”. As investors, what happens in the news is not going to change your dreams or your goals. You wanted to save for yourself or your family, and invest for a particular and specific reason — like giving them and yourself the potential of a better life in the future.
The collapse of the chicken supply to Singapore or a potentially new pandemic in the form of monkeypox is unlikely to change those targets. Reacting to these scary stories is not going to help with your blood pressure either.
The media, no matter how learned and talented, is not always right, nor has it the ability to definitively predict the future. So, don't put your stock in news, and stick to the gameplan you have so carefully charted out. If you are feeling worried about how everything in the world may impact you, come and chat with us.
