It was mid February 2016 and the S&P 500 was down almost 15%* from its recent high. The market action on this particular day was especially bad so I did what I always do – I turned on CNBC. As a trader for 11 years, CNBC was on ALL DAY, EVERY DAY. I watched, or rather listened to, so much CNBC that I had most of the commercials memorized. You never knew when CNBC would break a news story that would move the markets – for trading purposes it was a good resource. As I transitioned into my role as a portfolio manager and financial advisor, I found myself watching much less CNBC. However, I still turned it on at the end of the day to hear the investment opinions of the various guests and hosts.
On this particular day, the mood on CNBC was very negative. One trader said the market was going down much further so his advice was to buy gold. Another trader said the market was going down further so his advice was to buy treasury bonds. A market “technician” came on one of the shows – his job is to “read the charts” and figure out where markets are headed. His charts were “telling him” that the S&P had another 15% of downside before it reached his “support” levels. Everyone, I mean EVERYONE, was convinced the market was going lower – much lower. These were smart guys managing billions of dollars of assets – pretty scary stuff.
As I sat down at the dinner table with my wife and daughter, I mentioned that the market was down again that day. My wife asked me, “do you think it will go down any further?”. I told her I thought it probably was headed down another 10% before buyers came in. I was pretty depressed as I went to bed that night – I was certain we were in for more market pain in the days and weeks ahead.
The next day, a funny thing happened – the market didn’t go down. The day after that, the market went up – and it went up again the next day. There was really no good reason why the market stopped dropping – it just did. And it never stopped going up. We have rallied from that point on – the S&P has gained roughly 30%** from that day. The day EVERYONE on CNBC thought the market was heading much lower was the exact bottom of the market.
No more CNBC (or any financial television) for me. I am looking for news sources to enrich my judgement, not impair my judgement. I do watch about 30 minutes of Bloomberg in the morning, but I am looking for a recap of the overnight trading – I do my best to block out the guests pushing their book. If you are trading in and out of specific stocks, then CNBC may be a great resource. If you are a long term investor, I think you will be better served ignoring the day to day opinions offered in financial media. Focus on your asset allocation, your financial plan and your financial goals. Let your advisor lose sleep over market fluctuations.
*Returns are from morningstar.com 11/2/15 through 2/8/16
**Returns are from morningstar.com 2/8/16 through 5/23/17
***The above article is informational in nature only and is not a recommendation to buy or sell securities. All information is gathered from sources believed to be reliable, but neither Charles Brown nor Ausdal Financial Partners, Inc guarantees the accuracy of the information. All investments carry a degree of risk. Individuals should consult with their tax and investment professionals before making changes to their investment portfolios.