Have you ever read a news headline and immediately felt uneasy or even a sense of doom? Then after reading the article, the report barely fits with the headline! The headlines I see for financial markets are guilty of this tactic. It seems headlines and stories are always trying to elicit negative emotions, and the actual stories inside the headlines don’t always back up the chaos.
So that brings me to another question: what is purpose of the media in general? Is it to inform the public? I think that used to be the purpose of the media, and now it’s just PR mission statement. The media does indeed inform the public, so I don’t want to appear too harsh on all media outlets. I think public information is a byproduct of the media, but it’s not the purpose of the media. I believe the purpose of the media is generate revenue for shareholders. The mediums the media once used were selling newspapers and advertisements in those newspapers. Now that the Internet has become a more efficient news source, the media generates revenue through clickbait to churn advertisements via webpages. There are a few media outlets who charge an upfront fee to consume news, and that removes some of the conflicts from the situation, but by-and-large, most news webpages are littered with intrusive advertisements that gather the information from your web browser and sell your information to the highest bidder. The purpose of the media is to generate revenue by selling advertisements, and the more visitors to each webpage, the more consumers will view the advertisements, and then more revenue is generated.
When I check in on the stock market information, there’s always financial media headlines calling for the worst-case scenarios. I personally don’t watch CNBC, the financial markets television channel, but when I’m exposed to it (it’s always on at my office building), there’s usually doom-and-gloom information trying to elicit an emotional response out of a viewer to make kneejerk decisions. Here’s another contradiction: the information CNBC – or all financial markets news outlets, for that matter – deliver short-term information, and most individuals are using that short-term information to make long-term decisions, such as investment decisions.
Here's an example of news information I distinctly remember. Late in 2008, toward the twilight of the financial crisis, and after the Dow Jones Industrial Index plunged from about 16,000 points to about 9,000 points, Warren Buffett dumped billions of dollars into the stock market. CNBC was on the TV in the conference room, and the newscasters were calling Warren Buffett senile. The question was, “Why would anyone invest when prices are so low?” It’s not a secret that the easiest way to make money in the stock market is to buy low and sell high, yet the media reporting on financial markets were questioning Warren Buffett’s decision to buy while stock prices were depressed. I’ll never forget seeing this and being in such disbelief that the news outlet would intentionally report this. And yes, the verbatim wording was "Has Warren Buffett Gone Senile”. Shortly after, Buffett doubled his money, and less than a year later, the same reporters were praising Warren Buffett on his stock-picking prowess.
So why would a news outlet try to conjure emotional responses and elect to report such information? It aligns with their primary purpose. If we become scared or emotional about a subject, we’ll rely on the news for more information. If we search the news, we’ll be subjected to more advertisements, and then ultimately, we’ll give up our information to be sold for additional revenue.
How does this affect your financial plan? Money is already such an emotional topic, and there’s a lot of action involved in protecting and growing your wealth. As such, it’s an easy target for creating an emotional response and crafting some seedy headlines. The financial markets media seems to have a knack for separating people from the fundamentals of investing. The media often attempts to bully and scare people into making frequent changes to their long-term plan based on short-term information. The fundamentals of investing are to create a plan, buy in, and stay the course. If you have the fundamentals of your long-term plan established, you should continue to feel confident in your position, no matter what headline targets you.