13 Aug 2024 Don’t Let Fear-Driven Headlines Control Your Financial Decisions

Last Monday morning, while on vacation with my family, I fell into one of the oldest traps in financial media. Despite knowing better, I opened the CNBC app on my phone to “check in” on the stock market. The top headline screamed, “DOW PLUNGES MORE THAN 1,000 POINTS.” My immediate reaction was one of alarm—1,000 points sounded disastrous. As my blood pressure rose, questions began swirling in my mind: Why is the market down so much? What if it continues to fall? Should I be calling my clients to reassure them? Would I need to spend a large part of my vacation working? I hadn’t even read the article, yet I was already catastrophizing.

After a few minutes, I managed to collect myself and think more clearly. I remembered that the financial media often crafts headlines to provoke fear or strong emotions. I took a closer look and realized that a 1,000-point drop translated to a 2.6% decline—a significant drop, yes, but hardly the apocalyptic scenario the headline suggested. “Dow down 2.6%” just doesn’t have the same punch, does it?

Let’s face it, market volatility is tough for all of us. Nobody enjoys seeing their account balance shrink, sometimes by thousands of dollars in a single day. With upcoming elections, significant geopolitical risks, and the Fed’s challenging task of attempting a soft landing, we could be in for a bumpier ride over the next few months. But the last thing we need is media blasting us with sensationalist headlines designed not to inform but to agitate, making even bad decisions seem reasonable.

So, what can we do when confronted with scary headlines? Here are some suggestions:

1. Turn off the TV.
2. Delete the CNBC app from your phone.
3. Remember that your portfolio is likely less volatile than “the Dow,” which consists of only 30 stocks and no bonds.
4. Check your account balance less frequently—perhaps once a month instead of weekly, or weekly instead of multiple times a day.
5. Call your advisor. At Beacon, we’re always here to talk through any concerns you might have.
6. Stick to your plan. Chances are, the current market volatility hasn’t altered the long-term probability of achieving your dreams and goals.
7. Recall the wisdom of Ben Graham, the father of fundamental investing: “The market is a voting machine in the short run and a weighing machine in the long run.”
8. Focus on what you can control.
9. Remind yourself that short-term outcomes do not equate to long-term success.

And most importantly, remember: while market volatility is uncomfortable and something we’d rather avoid… it’s normal and expected.