It's an understatement to say that there's a lot of news lately—especially with regard to the economy. And as information drives financial decision making, it's tempting to want to absorb every headline out there. According to one recent survey, almost seven out of ten Americans feel "news fatigue," due in large part to the seemingly ceaseless cascade of breaking, urgent headlines at home and abroad.
Being a sophisticated investor means keeping on top of global financial news and reacting to trends. But at what point is reading every story and listening to every report that comes out a risk to your money instead of a benefit? The answer to that question is less than clear-cut. Keeping up with the currents of the 24-hour news cycle can be draining or even downright challenging when managing your portfolio. Or, on the other side of the coin, you may welcome every Wall Street surge with more exuberance than they deserve.
Even in the age of never-ending news, it's still possible to keep a clear head about your investments. Paradoxical as it might sound, the key to maintaining an even keel comes down to being selective with what, how, and when you take in financial news. With the right sources and mindset, you can master the torrent of news and separate signal from noise.
1. Beware the 24-Hour News Cycle
Major networks provide news around the clock. In the scramble for headlines, this can mean many of the headlines that come out are not fully formed or only tell a portion of the story. Before the advent of cable news and online publishing, news took more time to digest and experts had time to weigh in on the broader outlook for new developments. Presently, there's more interest in being the first to break a story, get viewers to tune in, and capture audience share. This is great for news junkies but less so for investors who want to anticipate trends and react when necessary.
Thankfully, there are still a few key tenets that can help investors from reacting to the wrong headlines—even in a world of constant breaking developments.
2. Remain Calm About Daily Market Fluctuations
One of the biggest attention-getters in the financial news business are the large market fluctuations we've observed on Wall Street. Scary as a hundred-point drop in a single day may seem to most, the net effect on most peoples' portfolio is negligible. It used to be rare for the Dow Jones Industrial Average to hit milestone figures. In 1995, the Dow closed above 5,000 for the first time; in 1996, it eclipsed the 6,000 mark. Only by 1999 did the index reach the 10,000 mark. By contrast, the 2010s saw the Dow hit highs much more quickly. For example, the Dow hit the 17,000 mark in July 2014—only to break 18,000 that very December.
As quickly as the Dow soars, so too does it seem to drop. For example, the index hit a record-breaking 20,000 on January 25, 2017. By February 5, 2018, the Dow experienced its highest-ever intraday value drop at the time (1,597.08), losing -4.62% of its value in the process. These fluctuations are enough to make even the savviest investor wince, and it looks as though these trends are more the norm than an exception.
In reality, however, the effects of such a drop are ordinarily small. Stock market prices have always fluctuated—but with more money and higher stock value comes bigger dips. A 1% change might mean more to a stock valued at $200 than $20, making it seem like market volatility is more rampant than it might actually be. widely, usually with very limited impacts on the investment and consumption behavior of most Americans. Indeed, by the close of trading at the end of last week, stock prices had rebounded nearly 6 percent from their recent low, offsetting more than half the loss suffered in the market correction.
3. Wait and See on Trade Talks
Headlines about trade negotiations often grab headlines—both for political junkies and investors alike. Indeed, free trade agreements give people plenty of reasons to be enthusiastic about market moves, but sometimes exuberance doesn't match with the realities of how diplomacy works in practice.
The diplomatic process takes a long time: even agreeing to come to the table can take countries years to hammer out. Even deciding on the shape of the negotiating table can hold up progress. The most recent trade war between the United States and China first began in 2018, and the first set of agreements were signed as recently as January 2020. Further agreements are still in the offing, with no end to the process in sight.
International trade talks take a long time to complete, and even longer to impact businesses. As an investor, it's important to take a long view on these negotiations. Bumps and disagreements are as common as progress is, and both are just as fleeting. Keep an eye on progress, but don't get mired in the small details.
4. Separating the Signal From the Noise
In order to find meaningful news and use it to guide your investment decisions, you have to have a strategy for understanding what's actually important. Taking a long-term perspective on news trends, as with investments, is usually a wise tactic. Don't get stuck looking at daily headlines as the biggest determinant in how you manage your money; rather, think of these headlines as the minor details that lead up to comprehensive information about the economy. Quarterly job numbers, business filings, and other documents tell the real story here.
In an age of endless headlines, it's important to think about what news matters to you personally. This is different than being vigilant about "fake news" and political bubbles, though. You want to make sure you're reading and viewing trusted sources, of course, but you can still exercise discretion with what stories actually impact you and your portfolio. When the news feels overwhelming, default to the stories that are relevant to your portfolio.
5. Find the Balance
There's an economy built around people who are too bullish or bearish, and both often garner the most attention and grab the most headlines. All too often, the loudest voice in the room ends up getting the most attention. This is true for cable news, too. With 24 hours of time to fill, those with the strongest personalities or opinions tend to get the most attention.
Listen to both exuberant and pessimistic voices, but don't take what's said as ironclad truth. The reality is often somewhere in the middle, even if it doesn't attract as much attention and eyeballs. Much like an economist, you'll want to use data, facts, and trends to help navigate you and your portfolio. A trusted team of financial experts goes a long way here, as they'll know more about your own finances than any talking head ever could.
It's easier than ever before to get inundated with news. Be it through app alerts, round-the-clock TV binging, or even casual water-cooler conversation, there's enough information out there to make overload feel like an inevitability. By keeping your news diet restricted to trusted sources, focusing on stories that matter to your portfolio, and knowing when to take a long perspective on trends, you can fight back against feeling overwhelmed.