"Investors are Cautiously Optimistic": What does that even mean? Interpreting Financial Headlines

​Just because political or financial news is a diversion, a challenge or even entertaining, doesn’t mean it’s actionable. In fact, what people outside the media rarely appreciate is how many of the headlines you see every day are effectively meaningless. And it’s been really getting on my goat lately! So in this article, I’ll interpret some of the most common headlines and what it actually means for your investments. 

​This is important because people don’t read the news any more, we consume a lot just through the headline.

Headline: Shares Rose/Fell Today by 1%
How to to read it: Millions of shares traded hands today because investors all have different goals, strategies, risk profiles, holding periods and ideas. Just like yesterday. The same tomorrow.

Headline: [Popular economist/fund manager] Expects Market Volatility to Pick Up Later This Year
How to read it: Our media economist needs to come up with something to say daily, and this is the end result. Saying you expect volatility to pick up at some point in the future is like saying you expect it to rain at some point in the future. So, this is really just a way of saying the markets will fluctuate, which of course they will.

Headline: Warren Buffet Lost/Gained $1 Billion
How to read it: Buffett has around $75 billion so what he does with his money shouldn’t concern most investors.

Headline: Markets Got Slaughtered Today: A Sign of Worse Things to Come?
How to read it: What’s interesting is that if markets were to rise by the same amount, you’d hardly hear about it. Misery sells! The market is up just over 50% of all trading days and down just under 50% of all trading days so what happens today is largely irrelevant. It’s what happens over a decade that counts.  

Headline: Markets Dealing With More Uncertainty.
How to read it: I find this one particularly annoying. Guess what, the future is always uncertain.

Headline: Is this share oversold/overbought? 
How to read it: Ask again in a few months and I'll tell you.

Headline: The Stock Market Enters a Painful Correction
How to read it: Retirement savers rejoice. Those with decades to save & invest should hope it continues.

Headline: Gold To Rise To $1500/oz.
How to read it:  If they knew that for sure, they wouldn’t have time to tell anyone. Too busy buying up gold bullion!!

Headline: Goldman Sachs Expects Stocks to Rally For the Next 3 Months
How to read it: Big financial firms have so many strategies on the go, and so many quotas to fill, at any one time, they’ll have a research piece put out in the coming days that totally contradicts whatever they just predicted. Depends on what they are trying to sell you on any given day.

Headline: RBA to raise rates?
How to read it: Kochie and his Comm Bank mate, Craig James, are my favourites here. These guys can make several contradictory predictions about rates in any given week. And has RBA policy ever helped you make better investment decisions? Even if you knew exactly what they were going to do in the future, you still have no idea how other investors will react. 

Headline: Investors Panic as Stocks Enter a Bear Market
How to read it: Don’t panic — expected returns and dividend yields go up during bear markets. This is an opportunity for long-term investors.

Headline: A Perfect Storm Caused Markets to Fall
How to read it: Stuff happens in the markets and we like to attach important-sounding narratives to everything. 100-year storms seem to be happening every other month.

Headline: [Permanently-bearish pundit] Predicts a Market Crash Worse Than 1987
How to read it: Certain pundits are constantly predicting peril and end times for the markets and the economy, so expect to read a few of these every week. And if they keep predicting, eventually they’ll be right.

Headline: The 10 Best Stocks to Own Right Now
How to read it: Love this one too!! What this actually means is that we have 10 random shares we think could go up for reasons we are purely speculating on.

Headline: Investors are Cautiously Optimistic
How to read it: We’ve got nothing so we’re going to run this classic that gives no information whatsoever.

Headline: Earnings Growth is a Second-Half Story
How to read it: No one ever really checks back on predictions so this is a great way to predict almost anything and not be held accountable.

Headline: Is [hot share] a Buy Here?
How to read it: The speed at which information moves these days, by the time you hear about a fad share in the headlines, you’ve already missed the boat.
 
So what should you do? There’s no guesswork required, you just have to focus on those things that you can control, like:

• Structuring your portfolio
• Taking risks you feel comfortable with
• Ensuring those risks carry a reliable reward
• Staying diversified
• Keeping a lid on costs and taxes
• Staying disciplined

​And the starting point should always be you and your own needs, not what someone is trying to sell you. 

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