If you are looking for an edge in investing, maybe try doing the opposite of what the news tells you to do.
CNBC has a well-known segment called “Markets in Turmoil” whenever stocks are in a drawdown. They bring out the graphic complete with bold red lettering and a bear in the background.
CNBC doesn’t use the segment flippantly, only when things are scary. Here’s a sampling:
May 2010: A Flash Crash causes the Dow Jones to fall 1,000 points in minutes.
August 2011: The European Sovereign Debt Crisis, downgrade of the United States’ credit rating.
October-December 2018: The Federal Reserve tightening and a US/China trade war.
May 2022: The Great Inflation and rising interest rates.
But how did markets fare after these events?
This is courtesy of Charlie Bilello on Twitter:
Believe it or not, one-year forward returns were positive 100% of the time after CNBC ran a “Markets in Turmoil” special!
This reminds me of one of the most famous quotes on investing by Warren Buffett:
“Be fearful when others are greedy, and greedy when others are fearful.”
Buffett is saying to take a somewhat contrarian view on investing. According to him, if you are scared to invest, it’s probably a good time to do it. Why? When people are fearful, it’s usually because stocks have already fallen in value. If history is any guide, we know that stock prices don’t stay down. Some of the best returns you’ll get are those coming out of a bear market.
CNBC isn’t in the business of calming investors’ nerves. They are in a battle for viewers. Unfortunately, fear sells.