The phrase “What a difference a year makes?” is used in common parlance. But lately, this timeline has been squeezed into one week prompting people to ask the question – “What a difference a week makes?”. Let’s look at the happenings in just the past week:
Citizens of Venezuela have had no power all week. Currency is worthless and food has all but disappeared and gone rotten with people now drinking water from sewers.
Boeing’s marquee jet crashes taking out everyone on board and most countries have banned its jet and now no one wants to get on its flagship 787-Max airplane.
Mentally ill white supremacist decimates people praying at a mosque in New Zealand and Facebook streams the shooting live from the gunman’s own head mounted camera for all the world to see. And still, the NRA insists for the umpteenth time that “Guns don’t kill people.”
And if that was not enough – every student who attended USC, Stanford, Georgetown etc. is being asked if they got “some help” from a man named Singer to get in to the University.
Lost in all the noise is the imminent release of the Mueller report that could shake up the market, which simply ignored most of the news except nailing Boeing in the past week.
Future Wealth’s View
The biggest problem with Wall Street is the non-stop flow of information impacting markets. Twenty years ago, news was either through the early morning edition of the Wall Street Journal or late in the evening TV news. But now, every minute, there is news impacting stocks and the volatility has increased in magnitudes unimaginable 20 years ago.
And so, the average investor when driving to work in the morning hears some disturbing news about his biggest holding on the radio, gets a concerning whatsapp message about his short position while at the weekly 9am meeting, gets a facebook message on his 401k portfolio being out of balance while at lunch, receives a tweet from the President dismissing Russian collusion as a fake news at the 3pm staff meeting and so on.
By the end of the day, the average investor is inundated with so many contradicting news regarding his stock portfolio that in the first week – he ignores it, second week – he starts to pay attention, by the end of the month – he is almost convinced that the fundamental strategy that enabled him to make money in the first place is flawed.
One does not need a degree from Stanford to figure out that this line of thinking is ill-advised and that investors should to shy away from reacting to every bit of news in building a portfolio for the long haul. But then, degrees from Stanford appear to be not so hard to get with “some help”.