Stocktake: Stock market gains no cause for outrage

Stocks often rise when headlines are negative and fall when headlines are positive

Democratic strategist Justin Horwitz’s comment – “Everything that is wrong with America, in one image” – went viral, but the howls of outrage were misplaced.

Democratic strategist Justin Horwitz’s comment – “Everything that is wrong with America, in one image” – went viral, but the howls of outrage were misplaced.

 

Some people have been getting all worked up over a recent screenshot of CNBC host Jim Cramer featuring two contrasting headlines; “The Dow’s best week since 1938” and “More than 16m Americans have lost jobs in 3 weeks”.

Democratic strategist Justin Horwitz’s comment – “Everything that is wrong with America, in one image” – went viral, but the howls of outrage were misplaced. As Ritholtz Wealth Management’s Ben Carlson pointed out, you don’t understand how the stock market works if you’re upset that it “isn’t getting killed every day even as the news gets worse”. Stock markets are volatile and forward-looking. An awful lot of bad news about the coronavirus was priced into stocks following the fastest bear market in history, eventually setting the stage for a similarly rapid rebound.

To borrow a simple point made by former hedge fund manager and author Victor Niederhoffer, stocks tend to go down after periods of excessive optimism and they tend to go up after there has been excessive pessimism. That’s why stocks often rise when the headlines are negative and fall when the headlines are positive. The stock market moves around a lot, says Carlson, and “sometimes doesn’t match the sentiment of the world at large”. If you get morally indignant about this, then you’re missing the point.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.