In the news business the main thing reporters, writers and editors have to deal with every day is the basic question of what constitutes ‘news’.  Commonly agreed is that, to qualify as news, a story should contain some key fact that is unusual. ‘Dog Bites Man’ is not news whereas ‘Man Bites Dog’ is. ‘Thousands of Airplanes Land Safely’ is a delightful piece of information but it will never appear in a headline.  So, it could be said that it’s news when something that wasn’t supposed to happen, happened. But still, we wonder why things that come out better than expected seem to not carry the same news value as things that turn out less well than expected.

A glaring example is the recent air strikes on Saudi Arabia’s Aramco petroleum processing plant at Abqaiq. News stories in the early days said that world oil supply was thus reduced by 5% and it would take months for the damage to be sufficiently repaired. Naturally, and deservedly, that was big news. It spooked a lot people and oil prices spiked as much as 15% overnight.

Of all the major coverage, it was only the Wall Street Journal that ran a story emphasizing that the United States was unlikely to see interruptions in supply, this owing mostly to two facts: the US is a net exporter and President Trump was willing to tap into reserves if needed.  More good news followed as the Saudis updated their repair estimates saying most of the reduced supply could be made up in a week or so and perhaps even days. If you wanted to have this information you had to dig for it. Other than the WSJ piece, none of it was headline worthy.

A handful of other examples, admittedly less dramatic, would be economic data that shows an economy much healthier than some want to believe.

Just this week, Initial Jobless Claims and Continuing Jobless Claims each came in lower (better) than forecasts. Building Permits, Housing Starts, Sales of Existing Homes and the Philadelphia Fed Manufacturing Index were all higher than expected. Who knew?

Unfortunately, the old adage that ‘bad news sells newspapers’ now has a modern companion. Bad news also gets clicks. Telling readers that ‘things are returning to normal’ may comfort those readers but it scares the daylights out of editors and publishers.

Ron’s Market Minute – Why I’m a Current Member of the Glass-Half-Full Club

In spite of the continuous negative headlines and a lot of fear in the markets, the Gorilla (the S&P500 Index*) is still just a hair away from its all-time high. Not bad for a ‘hated’ stock market, eh!?

So, in spite of a number of true headwinds such as a global slowdown, ongoing trade skirmishes, police action in Hong Kong, the continuous ‘hard Brexit’, political unrest in Washington, $17 trillion in bonds with negative yields, some pretty serious volatility over the past 12 months, and those weekend attacks on Saudi oil facilities mentioned above, the markets appear to be doing…ok, thank you.

Also worthy of note, in September — traditionally one of the worst months for markets — the S&P500 has been thumbing its nose and is up over 2 ½% so far this month, and it’s pretty positive for the year. 

For the doubters, I’m aware that we should keep in mind that stocks have gone nowhere over the past 12 months. According to my calculator the S&P index was up just 0.4% for the last 12 months as of the beginning of September, and from the January 2018 high through yesterday that index is up a somewhat uninspiring 4.7%, with pullbacks along the way of -19.6%-6.8%, and -6.1%. Oh, joy.

Couple all those concerns with multiple sharp pullbacks, and it’s easy to understand why investors are a bit less than enthusiastic about market prospects these days.

However, THERE IS NOTHING NEW HERE! Which is precisely why I am a Member of the Glass-Half-Full Club.

You’ve heard me (and everyone else that writes financial commentary) spout the truism that Wall Street likes to climb a wall of worry. While there is plenty to fret about these days, I feel that it’s important to note that – with the possible exception of the Saudi attacks- the rest of the issues are not even remotely close to being ‘new’.

Which means that investors have had lots of time to ponder and discount the chances of a negative outcome for each issue. Markets climb that wall of worry as the market participants come to the realization that the big headline-grabbing fear is unlikely to impact the sales of Microsoft or Coke, or the impact of people’s discretionary spending, or their multiple searches on Google.

There will always be something to grab the headlines, but remember that it is the consumer that accounts for about 70% of the US GDP! So as long as there are plentiful jobs (for sure!), rising incomes (yup), home values and 401k’s rising (or at least not falling), then lots of companies will continue to make money. And when lots of companies show rising profits, stocks usually also rise. 

So, when an issue becomes well-known and that issue doesn’t actually threaten economic life in our world in the long run, investors tend to figure out that there is nothing to fear. Hence: nothing new here. 

With that in mind, we seem to be living in a time to close our eyes and ‘buy the dip’, and life, and markets will… continue.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.