Get Ready For The Bull Market in Opinions

“The higher the VIX the higher the clicks.” – Phil Pearlman

It’s easy to ignore the opinions of the financial media during a bull market because just about everything is working and you feel like a genius. But once stocks start to head down investors look for advice or comfort anywhere they can find it.

The markets aren’t exactly in turmoil just yet, but things are starting to get interesting. Volatility was back in a big way this week as the S&P 500 had moves in excess of 1.5% for three days in a row, two of those moves being down.

It might be hard to believe after the rout we’ve experienced the past couple of weeks (around a 5% loss), but the S&P is still up 4.6% in 2014. The largest U.S. stocks are the exception though, not the rule. Here’s how some other markets are holding up through Friday:

  • World Stocks: -0.4%
  • U.S. Small Caps: -4.1%
  • European Stocks: -8.8%
  • Asian (Pacific) Stocks: – 5.5%
  • Emerging Markets: 1.8%

Again, not quite a rout as of yet, but the nerves are starting to kick in for many. This was bound to happen at some point following the performance of the past five years or so.

Because of the increased volatility, people are going to be coming out of the woodwork this week to offer their opinions and solutions in hopes of calling the next move correctly.

Just be aware that there will be a huge bull market in the number of opinions coming at you from all directions. Everyone will want to say their piece. A few things to consider from this deluge of opinions that you’ll see in the coming days and weeks:

Traders, portfolio managers, financial advisors and the media all approach the markets from a different perspective. Don’t pay attention to what traders are saying about the market and expect that information to be relevant to you if you’re not a trader and vice versa for traders listening to long-term fundamental investors. Now is not the time to abandon your investment philosophy and pick up something new.

Don’t confuse your time horizon with the person handing out advice. This is probably the biggest problem area for average investors looking for investment advice from the media. Someone on TV isn’t going to have your particular time horizon in mind when they are discussing the markets. Context matters.

Don’t expect the message to be tailored to your circumstances. None of the thousands of market voices out there spouting off will have your personal situation in mind when giving their thoughts — why would they? So don’t hold them accountable when their advice goes for or against you.

Tactics always sound better than having a plan in place. Hunkering down, getting defensive or searching through the rubble for bargains sounds interesting when things get dicey. It will feel better to do something instead of sitting on your hands and doing nothing. But trying to do these things on the fly because others may be doing them is a sure way to lose some money without a plan in place.

Interesting doesn’t mean actionable. You can follow the ups and downs in the market solely for entertainment purposes if you find it interesting. That doesn’t mean you have to act on every single move in the market just because it piques your interests. Actions should be triggered by something other than your nerves.

You don’t have to have an opinion about everything. It’s OK to say you don’t know what’s going to happen. No one’s going to think any less of you if you don’t have a clue about what’s going to transpire in a volatile market. You can still manage risk without figuring where the markets will go by this Wednesday.

It’s fine to have an opinion about what’s going to happen next. We’re human. It’s fun to think about what’s going to happen in the future. Just be sure to understand what you’re getting yourself into when you listen to the wide range of opinions from the financial industry during these kinds of markets.

Further Reading:
Vetting your sources of financial advice

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  1. Tony commented on Oct 12

    I think the term BULL is very appropriate when people come out of the woodwork during this time. Like Morgan Housel says if you had to speak for 24 hours straight how much of what you said would be B.S?

    • Ben commented on Oct 12

      Exactly. But it’s up to investors to realize this and not get sucked in whenever they here someone on TV giving their 2 cents.