Occasionally something happens that causes me to take a little pause out of my day and ponder the digital world we live in today and how it can be so different from the old non-digital one – the one that most of us grew up in. Probably the greatest benefit of this digitalization is the speed at which things can happen. Information is nearly always at hand. You want to check your bank balance, find out how long a year is on Jupiter or buy something on-line? Within five minutes you can do that: in fact, in that five minutes you can do all three. Pretty cool, yes? There is however a downside. Sometimes we can be overwhelmed by an avalanche of info. We should not forget to be judicious and even a but suspicious as we peruse the incoming. A case in point is news – news that may impact one’s financial decisions.

Although some instant news articles can be helpful to investors, it is also true that many will not…and can even be harmful. I know, you might be thinking “How can MORE information ever be harmful?” Well, I’m glad you asked.

With all information (note I did NOT say knowledge) moving at the speed of light, this means that investors have the ability to consume an updated news story at (literally) every second of the day. Additionally, investors can self-select the viewpoint they wish to see and that can be dangerous. Seeing only stories that reinforce their already decided point of view can make them feel good but it likely won’t make them any smarter. There is actually a term for this; it’s called confirmation bias. And, our concern is that it can lead investors to make decisions based on emotion rather than actual data.

Also, we live in a world where media tends to focus on uncertainties and the potential for negative effects, rather than one which provides actual fundamental data that investors must have to make informed decisions. When economic news and fundamental data is strong, it appears to be short-changed in the media. Here’s an example: Corporate earnings posted solid gains in the third quarter of 2016 and that was widely reported – if you took the time and had access to the actual reports issued by those corporations. Where it was not widely reported was in the news media. The reason is, of course, that optimism doesn’t sell well, but negativity does.

On a similar vein, I noted early this morning that rather than reporting actual news or current weather information regarding the snow in the northeast part of our country, the headlines were all about how bad the traffic, congestion, and problems COULD be if the storms end up being worse than expected. Pretty irrelevant, but good headline news.

More examples, from 2016:

China’s Economic Hard Landing: In early 2016 media proclaimed problems with the Chinese currency and Chinese shares plummeted. News sources were generally calling for a hard landing of the economy and problems with bad loans which would lead to a debt crisis. Chinese stocks crashed bringing fears of a global meltdown. What actually happened? Chinese GDP was in the range of almost 7% (vs. US growth of about 2%) and stocks globally posted decent gains.

Brexit: Perhaps this was the most surprising event (or maybe second-most surprising after the Trump election) of last year. Media suggested that the idea of Great Britain leaving the Common Market could result in instability in the region and horrific economic possibilities. Stocks were volatile as Britain approached the vote, but then they rallied within several days. In the end it was much ado about nothing. It’s still unsettled or course, but investors and civilians alike have gotten used to the more logical notion that even if Brexit is completed (some day) the United Kingdom will still have pretty good economic relations with Europe and the rest of the world, just as it has for most of the last few centuries (a few periods of exception duly noted).

Trump Election: Who will forget the plunge in US stock values during the night of the election when it appeared that Trump had a chance of being elected? We heard stories of people liquidating their entire stock portfolio as the election drew near, and as they expected markets to totally crash. We will remind you that by the next morning futures markets had corrected this misinterpretation, and U.S. and global markets rallied strongly after the election.

So, here’s this week’s bottom line: When media is trumpeting a big story that feels alarming and pundits are suggesting that the potential event could have a big, negative impact on your investments, slow down! Read multiple news outlets, ask questions about the logic of the situation, and remember that last years’ big negative events were, in the end, mere conjecture. When all else fails, have a look at the data – does it support the negative headlines? If not, turn off the TV or your computer, and enjoy your day.

Enjoy the view.

Market Minute 2/10/2017 – Another ‘Gap Up’

On Thursday morning markets opened up with another gap up.  A gap is defined as: 

”… a break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst’s outlook or any other type of news release.”  (Source: www.investopedia.com/terms/g/gap.asp)

This is more good news for markets. The Thursday headlines mostly dealt with information that the current administration would be announcing ‘Important Income tax changes’ within the next couple of weeks. Given that the campaign promises included references to lower corporate and personal income tax rates, it appears that another move toward fulfilling that promise was appreciated by the markets and investors. 

In addition, the gap showed up across industries and countries. It wasn’t specific to one particular index or market sector- or even one country, for that matter. So it appears that consumer confidence is (at this time) alive and well. And that, typically, bodes well for the markets.

Thursday ended with markets up, which also is typical after a gap up.  And today (Friday) the futures (expectations for today’s markets) are showing green- an indication that prices will open up again. The trend is up – enjoy the current rally!

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners

Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
10000 N. 31st Avenue, Suite C-262

Phoenix, AZ 85051

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at info@denkinvest.com.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.