Fisher Investments Editorial Staff
US Economy, Investor Sentiment

The Show Will Go On

By, 11/18/2009

Story Highlights:

  • Headlines often pin daily performance on a big piece of news after the fact—but markets are hardly so simple.
  • A constant barrage of information is absorbed by the market daily, and sentiment drives prices in the ultra-short term.
  • Short-term market jitters always smooth into longer-term market trends, more amenable to forecasting and fundamentals. Day to day, it's best to ignore the play-by-play.

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Take your seats, ladies and gentlemen, the show's about to begin! But this isn't Broadway. It's the corner of Wall and Broad. And that's no stage—it's a television screen broadcasting live from the floor of the New York Stock Exchange.

 

The daily news cycle is as thick with intrigue as Hamlet or The Merchant of Venice—but unfortunately, it's quite a bit less insightful.

 

Take Monday for example. Fed Chairman Bernanke gave a somewhat somber economic outlook just after October retail sales beat expectations. Big Ben vs. the Retail Giant: A head-to-head matchup with billions in stock gains or losses on the line. Stocks closed higher, so which bit of news won the day? Of course, in hindsight it was retail sales outweighing Bernanke blues. But what if stocks had fallen? You can bet headlines would have declared the reverse—something like, "Sales Ok for Now, But Bernanke Says Trouble on Horizon."

 

The market's daily movements are hardly so simple. A million and one snippets of news and economic data hit our screens hourly. And it's not just domestic information. Globally, there are even more tidbits to consider—not to mention plenty that goes completely unnoticed by the mainstream media but matters nonetheless.

 

Even more confusing: It isn't just about the raw information, but also interpretation of that information. Markets tend to be very smart over months and years. But day to day? Not so much. Sentiment-driven, short-term stock prices often move in irrational and unpredictable ways—making causal ties that much more uncertain.

 

After the fact, it's easy to pin "up or down" on "this or that," but in the middle of the melee? Impossible. Luckily, there's no need to time the market on such short notice. Experience shows timing strategies rarely pay off.

 

So, let's lengthen our gaze. Short-term market jitters always smooth into longer-term market trends, more amenable to forecasting and fundamentals. Today's likeliest long-term trend offers ultra-lean companies leveraging improving economic conditions to reap unexpected earnings—and a stock market rising to meet them both.

 

The show will go on. But day to day, it's best to ignore the play-by-play.

 

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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