Discover more from TKer by Sam Ro
Is good economic news really all that surprising? 📰
Let's talk about news sentiment and why I created TKer 📈
People continue to be blindsided by the resilience in personal consumption growth.
According to Census Bureau data, retail sales in July increased by 0.7% to $696.4 billion. As many news headlines show, this pace exceeded many economists’ forecasts. (See here, here, here, here, here, and here.)
“The media was flooded with stories the past 18 months that ‘consumers are cracking under inflation,’” said Robert Burgess, executive editor of Bloomberg Opinion. “It never happened.”
To be clear, TKer isn’t in the business of making predictions on short-term moves in the market or the economy.
Rather, TKer is here to provide context so we can all get a better understanding of what’s driving the economy today, which may help us understand what will drive the economy in the future.
Almost every month over the past two years, measures of personal consumption like retail sales have climbed to new record highs. And almost every time, the context has been the same: Job gains and strong consumer finances bolstered by excess savings are fueling spending growth.
For more on this, read: Three massive forces have fueled the economic expansion for the past two years 💪
Nothing’s certain. But maybe we should be optimistic about the consumer outlook, since the forces that have been driving spending growth for the past two years continue to suggest spending will hold up.
With all that in mind, I think it’s worth remembering that you should beware of what appears to be a lot of alarming business news.
Most actual ‘news’ about the economy and the stock market isn’t bad 📰
It’s not just the past two years that have been good in the economy. And similarly, it’s not just the past year that has been good for stocks.
Ritholtz Wealth Management’s Ben Carlson recently observed that since 1929, the economy has been in growth mode 84% of the time.
eToro’s Callie Cox noted that since 1950, the stock market has been in a bull market 83% of the time.
These facts may seem in conflict with the way information is covered in the news.
Ross Mayfield, an investment strategy analyst at Baird, shared some interesting insight on LinkedIn. According to a recent study of article headlines in 47 news media outlets, sentiment has gradually gone from positive to increasingly negative over the past two decades.
“It’s not that ‘news’ is inherently bad, and in fact, most programs do a great job informing and educating,” Mayfield wrote. “I’m not anti-media. But over time, and especially in the last decade or so, news has shifted in a way that gives outsized attention to the fear-stoking and anger-provoking.”
The San Francisco Fed maintains a sentiment index that tracks “economics-related news articles from 24 major U.S. newspapers.” It’s spent most of the past two years skewing negatively.
The University of Michigan has several “news heard” indexes based on the responses of their monthly surveys of consumers. While the “News Heard of Recent Changes in Business Conditions“ index has improved in recent months, it remains pretty dismal relative to the historical averages.
Of course, everyone’s experience with news is a bit different.
But if you feel that the economic and market headlines seem overly negative, then it might be time to reconsider how you’re getting your information.
“In the end, the competition for our attention has never been greater, and it’s not going to ease anytime soon,” Mayfield wrote. “As we move forward, one of the most important skills an investor can have will be separating news from noise and ignoring more sensational headlines – especially when it comes to your money.“
Why I started TKer 📈
As I argued in the December 1, 2022, TKer: “This is an issue with news, a business that’s incentivized to address its audience’s interests and not necessarily its needs.“
Troubling developments, while factually accurate, will often get outsized news coverage despite reflecting a relatively small part of the economy or the markets.
This happens because our eyes and attention tend to gravitate more toward bad news than good news. And we’ll talk about it, which gets bad news trending on social media. And those who are just hearing about some bad news will Google it, and suddenly it’s trending in search data. Major news organizations have people monitoring what’s trending on social media and in search, and that information gets right back to the editorial leaders who assign stories to reporters.
For more on this, read: Beware alarming business stories that get a lot of news coverage 🗞️
To be clear, I’m a fan of and subscriber to most of the major business news outlets. They break lots of important news, and they advance lots of great information. I just don’t think everything they cover actually matters. And oftentimes, I don’t care for how they frame certain stories.
TKer is only interested in the news, data, and insights that inform the longer-term themes that matter to long-term investors in the stock market.
And it is usually the case that TKer’s newsletters have a positive slant. This is not because TKer is biased. Rather, it’s because the news and data tends to actually be positive when covered fairly.
History shows things usually work out positively, and there’s little reason to believe this won’t continue to be the case in the long-run future.
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