Scared Of The Headlines? Here’s A Tip…
No doubt about it, the European Union (EU) is caught up in a whirlwind of uncertainty right now. One day it sounds like the group of nations is ready to rip apart, and the next it appears European leaders will get the whole fiasco ironed out.
And while financial matters are more stable here in the US, we have some worries of our own. Recent US economic data has all the markings of a genuine economic slowdown.
In fact, Ben Bernanke and the Federal Reserve lowered their 2012 US GDP growth outlook to 1.9% earlier this week. That’s down from previous estimates of 2.4% to 2.9%.
This potent combination of global economic uncertainty has markets bouncing around like a 5-year old on a sugar high. One day the market’s up triple digits, and the next it’s down the same.
And as sure as the sun rises in the east, when things get wild in the markets, inexperienced investors tune into the business news channels to find out what to do with their money.
If you’re in that boat, listen up…
I’ll admit, it’s easy to get caught up in all the recent stock market drama. But making investment decisions based on what you hear from a financial news channel is one of the worst things you can do.
Why?
There’s a plethora of bad news on just about every business news channel out there right now. And while financial journalists are just doing their job, most of them focus on every ounce of troublesome economic news under the sun.
After all, bad news is what gets ratings…
According to numerous studies, financial news channel viewership skyrockets when markets are in turmoil. But when all’s well and markets are rising, viewership sinks like the Titanic.
It’s an interesting phenomenon, but it makes perfect sense. When the you-know-what hits the fan, casual investors want to know what’s making the markets tick. And business news channels are happy to give it to them.
But here’s the thing…
Negative financial news makes it easy to panic and hit the sell button. Many investors don’t realize that making an investment decision based on panicky headlines is most often one they’ll regret.
How do you clear your head and focus on the facts?
First of all, don’t be afraid to put the financial news on mute for a while. Countless hours of scary headlines are enough to drive any investor crazy.
Secondly, look to the charts.
Regardless of the scary financial headlines, what the well-informed smart money is doing is apparent in the market’s price action.
That’s why analyzing charts of broad indexes and individual stocks is an essential task for investors. And if you take a look at long-term market trends, you’ll find something very interesting…
Believe it or not, the Dow is still in a long-term uptrend. In fact, look at any of the major indexes and you’ll find they’re all still in solid uptrends from their early 2009 lows.
What’s this mean?
Whatever the tumultuous headline may be, pros are still using market weakness as a buying opportunity. In fact, when things looked the worst in recent weeks, pros did the opposite of what fearful investors did… they bought.
And that’s precisely what you should be doing as well.
Now don’t get me wrong, there will come a point when buying market weakness isn’t the correct strategy. But I don’t see that happening until the Dow breaks and holds below 12,000. Who knows what scary financial headlines will take the Dow to that level, or if it will happen at all.
Bottom line…
If you want to make investment decisions based solely on scary news headlines, be my guest. But if you want to make emotionless investment decisions, bypass the news channel and look to the charts.
As long as the broad markets remain in an uptrend, it will pay to buy when the headlines seem the scariest.
***Editor’s Note*** One of the only commodity markets solidly in the green during yesterday’s sell-off was natural gas. To discover why this commodity was green when everything else was red, (and more importantly how to capitalize on it) check out the Commodity ETF Alert.
Until Next Time,
Justin Bennett
Category: Stocks
