Take Stock Market News with a Grain of Salt

When it comes to reporting on the goings on in the stock market, the reporting often tries to make what is moving the markets more complicated than it actually is. I mean, if you think about it, it's a 24-hour news cycle anyway regardless of whether it is on television, over the Internet, or in various paper publications.

People need to sell news and you can only sell interesting news.

On top of that, the world of stock market information is chockful of analysts and experts and CEOs and all sorts of people who, let's face it, need to be relevant. And of course, they want to be experts for a reason. Therefore, whenever something happens to move the markets this way or that, someone feels the need to explain it away.

I tend to be one who tries to read between the lines a bit.

It is not to say that all of the news about what's happening in the markets is wrong. It's not to say that it's always over or under stated. It is also not to say that there are usually many reasons for market movements.

The stock market is both simple and complex.

While 2023 was not a stellar year in the markets by any measure, the stock market still performed well enough. People made profits. And toward the end of the year the markets did enjoy a rather extended streak of upward movement. 

2024 has of course, started off with mostly down days. The news is looking for all sorts of reasons why that is happening. What the Fed is doing or is expected to do. Mortgage rates. The CPI and jobs reports. The PPI and inflation data. Gas prices. The Houthis interrupting the supply chain. 

And to be fair, all of these things do influence the markets. But it is the "complicated" story. It's the explanation all the experts are pointing to. 

The thing I always try to say is that if you are the average Joe investor, paying attention to a lot of this hype, and that's primarily what a lot of it is, is futile. These are things that may have a day-to-day impact on something in the markets going this way or that way. But the average Joe investor only needs an eye to one thing.

The future.

And even though past history is not necessarily an indicator of future results, a common catchphrase used in the markets, there is one truth that most people can rely on comfortably. That is, the markets have ultimately only one direction.

Up.

Even when the markets correct or crash, they always rebound, and before the next crash or correction end off higher than where they last left off.

While there are many economic and political influences affecting the markets all the time, I think the start to 2024 is more easily explained than what the news is reporting about it. Again, all of the factors being stated do matter. But the underlying simple factor I think carries more weight and is closer to the real reason 2024 is starting off with less than a bang.

Those profits from 2023.

What else happens when the new year rolls in that is important to consider? Taxes. What happens when people have profits on paper that are realized? They are taxed. When trading reconvened on January 2nd, we of course entered into a new tax year. It would have been smart for any investor, long or short term, to hold onto their gains until a new tax year came into play. And that is what most people did.

The start to 2024 is really nothing more than investors now taking some of those profits since they won't have to worry about paying taxes on them until 2025. On top of that, there's the whole year ahead to make all sorts of strategic plans about offsetting the tax bill to come.

That being said, it is important to pay attention to at least some of what is being reported as factors moving the markets. But ultimately it should be a smaller consideration. When we are investing, we are not investing in the markets, per se. We are investing in companies. And so long as you are paying attention to the fundamentals of the businesses you are investing in, what happens in the day-to-day doesn't matter and should not be a formulation of a basis for determining where the markets are going, or what we should do with the individual businesses we are invested in.

The experts need to be relevant. The reporters need something to turn in to their editors to keep their jobs. The analysts need the same. All we need to do as investors is make money. And if we don't allow these outside influences to impact our decisions, we will make lots of it.

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OTHER MONEY COMMENTARY BY JIM BAUER

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