By Kostya Etus, CLS Associate Portfolio Manager
I love watching movies. It is one of my favorite things to do in my spare time. I really enjoy all types of movies, and I will give almost any film a chance except for one genre: horror. I find horror films typically do not have well-developed plots, nor particularly good acting. Horror films mainly focus on trying to scare or surprise the viewer to invoke an emotional response. Some people really like this; I do not. I enjoy movies for their depth and passion, not for knee-jerk reactions that keep me up at night.
As an investor, I’m not into horror shows either. To me, the traditional ebb and flow of market cycles is like an epic blockbuster adventure. Although there may be climactic moments of excitement, there tends to be a happy ending in the long run. But when we get these horror flicks – Greece breaking off from Europe, the UK breaking off from Europe, Ireland breaking off from Europe (I sound like a broken record), Russia invading Ukraine, Brazil giving in to corruption, China doing too well, China crashing – it gets pretty scary.
One channel in particular seems to be running 24/7 horror movie marathons. The channel is not doing anything wrong. In fact, it’s using a common marketing technique: shock the audience. The more shocked the audience is, the more tuned-in they will be, and that’s good for the bottom line.
To make matters worse, technological advancements have created a global network of seamless communication, which means we all now suffer from TMI (too much information). Everyone is constantly exposed to horror movies, and we end up being scared of life. I’m surprised anyone ever sleeps!
What is the solution? Change the channel, put on an oldie, and enjoy yourself. In investment terms, cut out the noise and focus on the fundamentals driving the underlying market cycles. Figure out where markets are, where they are most likely to be going in the long run, and point your investments in that direction. Keep them there until something fundamentally changes. It’s just that plain and simple. Plus, you’ll get more sleep.
You can read more about why investors shouldn’t trade on the news in our most recent Monthly Market Review.