The Stat Explaining Why The Stock Market Gets So Much Negative News Coverage

The stock market climbed to all-time highs, with the S&P 500 setting an intraday high of 5,878.46 on Thursday and closing high of 5,859.85 on Monday. For the week, the S&P rose 0.8% to end at 5,859.54. The index is now up 22.8% year to date and up 63.8% from its October 12, 2022 closing low of 3,577.03.

The stock market usually goes up. Historically, prices have been in bull market over 80% of the time. Investors who can commit the time usually do well. Just this past week, the market rallied to new highs.

If this is the case, then why does so much news about the stock market seem to be negative?

As we’ve discussed before, negative stories tend to draw more audience interest than positive ones. This includes bearish warnings about what’s to come. Some news outlets capitalize on this behavior by giving outsized coverage to bad news.

But there’s another much simpler explanation: The stock market experiences a lot of down-days.

“On any given day in the stock market, your odds of a positive return are just 53%, little better than a coin flip,” Creative Planning’s Charlie Bilello.

If you’re in financial news, and you have to report on the markets every day, then about 47% of your days come with the stock market trading lower that day.

On any given day, the odds the stock market trades lower is relatively high. (Source: @CharlieBilello)

Unfortunately, most people won’t accept that prices are down that day “just because.”

That brings us to markets reporters and editors — one of which I have been in a variety of capacities over the last 18 years — who are in a very tough spot. All of their reporting and researching may have them conclude that the balance of news and risks is positive. But if prices are down, many are still under pressure to spin up or back into some narrative.

This leads to weird headlines like “Stocks fall as traders take profits” or “Stocks close lower as optimism fades” or “Stocks pull back on heightened uncertainty.”

Meanwhile, there’s never a shortage of bearish pundits happy to offer quotes with their thoughts on why prices are down on a given day. And their bearish assessments seem much more compelling when the live charts we’re all looking at are red. Sometimes, they’re right. Most of the time, they’re just amplifying the noise.

Even when a news outlet is unwilling to commit to a narrative, a straightforward headline like “Stocks Fall” can still be unsettling.

And reading “Stocks Fall” 47% of the time you check on the markets can be very unsettling, even when these down days are often occurring during bull markets.

All of it makes for a lot of investor angst. It’s no wonder why many people will believe the stock market is down during periods when it’s actually up.

What Are We To Do

To be clear, I’m not anti-news. I watch and read the big financial news publications every day. There are lots of incredible reporters and market experts providing great insights.

But I believe investors need to be mindful of what they’re getting into when they tune to a business channel, load up a business news site, or open a business newspaper.

Understand that stock prices will be volatile over very short periods. The markets and the economy are “full-on Monet,” which is to say that the numbers will zag zag in the short term even when they’re trending higher. So prepare for lots of voices to explain why one day’s bad news could be the beginning of something worse even when it’s just noise.

To that same point, when an expert gives their forecast for the market, make sure you know their timeframe. If you have years to invest, an expert’s one-day or one-year forecast might lead you astray. (By the way, an expert who’s bearish in the near term may also be bullish in the long term.)

And if you can, take a little time to understand the biases of the individuals and entities advancing their views. Are they selling ad space? Are they advancing political interests? Are they in the business of monetizing fear? Not everyone is interested in helping you build wealth.

All that said, TKer is here to help. TKer is written for long-term investors in the stock market. Two of our more popular reads are the weekly “Review of the macro crosscurrents” and “Putting it all together”* sections. The former provides roundups of new data with context and the latter provides an up-to-date big picture summary for that data.

While the short-term noise is often unsettling, TKer continues to find that the long-term outlook for the stock market and the economy remain favorable.

A version of this post was originally published on Tker.co and appears here with permission.