Mini-corrections are normal for investment markets. It can be difficult to remember that coming out of this recent financial crisis and recession, but after prolonged bull-market periods it is quite normal to see a bit of a pull-back. Since 1927, the average correction within a bull market has been a decline of 13.3%, which we are still short of. It is normal for our relationship with risk and fear to be skewed after the systemic collapse in 2008, but the “creation of crisis” found on the television airwaves does not help our behavioral relationship with our finances.
Fox Business continues to ask on a daily basis “Is the World Broke?” “BREAKING NEWS” flashes across the screen on CNBC the moment an executive takes a labored breath at a domestic large-cap firm. Isn’t every news piece they are running “breaking news”? The question is whether the delivery needs to be in such a way as to disturb an internal crisis in the viewer.
Additionally, nearly every other commercial on business news stations is for investments in gold bars—a traditional crisis inflationary hedge instrument. While a tilt to commodity holdings for some investors may be appropriate as a good hedge against inflation, it is unconscionable to solicit the viewer to move all of their money to gold bars or coins because we are in a prolonged recession. At this point, that could be the equivalent of buying Yahoo stock at the height of the NASDAQ in 2000.
The point of my anecdote is not imply that we are some how out of the woods from a prolonged global recession, but merely to reflect that the next crisis is not occurring every minute. Behavioral finance, or balancing fear and greed with a long-term investment strategy, is something each of us struggle with, and 24-hour news television sometimes only adds one more irrational voice in our heads.
