Clients who have worked with us for many years know how we feel about the media. In our view, the media is an attention-seeking, eyeball grabbing business trying to generate headlines with the objective of turning a profit. They alone can’t be blamed for the portrayal of the “facts,” nor can or should they be complimented. They are businesses and institutions vying for the ever-growing media market share, and, as a shareholder, one would encourage an aggressive strategy.

As a result, the onus is placed on the reader to make sense of the words on the page: biased or objective, factual or fake, exaggerated or not, important or unimportant, or useless versus useful. Exaggerating the unimportant, useless, albeit factual information is purposely misleading those watching or reading. This news consumption can lead to extreme emotions: fear, greed, or happiness.

For the average investor, there is one particular area of concern – speculation. Remember that speculation is a synonym of gambling. As we consume non-economic media, we often hear pundits speculating on outcomes of political races, criminal trials, sporting events, and weather patterns, for example. When we consume economic media, we often hear ‘experts’ opine on interest rates, inflation, the trajectory of the dollar or the market, and the effect of geopolitics on the domestic and global market. For information to be relevant it must be both important and knowable. Each of the topics mentioned (i.e. interest rates, inflation, market and currency predictions, and geopolitical implications) are not knowable, but instead, each is speculative. It can’t be said then that such “predictions” are anything other than speculation.

Speculation

If you remember one thing from this article it should be this:

“A cornerstone for rational decision making is an unbiased appreciation of uncertainty.” – Daniel Kahneman, Thinking, Fast and Slow

In other words, in order to provide truly objective, unbiased advice, one must first acknowledge and appreciate the inherent uncertainty surrounding many of life’s decisions.

Generally, this is not what clients want to hear. Often, people would rather their advisors act on “knowledge” that only the advisor has. To act on “pretend knowledge” is to speculate. We appreciate, especially in these unprecedented times, there is great uncertainty in the short-term. Long-term we continue to believe in capitalism and global economic expansion as has been proven over the past century. But it is hard to focus on the long-term when the media creates short-term distractions.

Not every stock market movement can be explained by recent events, whether political or economic. When you hear the media explain market movement due to specific news of the day, remember it is frequently incorrect. It is only extremely rare events, like 9/11, or the early days of pandemics, that can be the sole cause of daily market fluctuations, and even these rare events don’t explain long-term trends. Instead, only corporate earnings determine long-term market trends.

While we know our clients will continue to consume news, whether economic or non-economic, we encourage our clients to remember that the media’s objective is not to provide real advice –its objective is to entertain.