Personal Wealth Management / Expert Commentary

Fisher Investments’ Founder, Ken Fisher, Reviews The Role the Media Plays in Markets

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher discusses the role media plays in capital markets. According to Ken, most media is designed to capture its audience interest by building hype around very short- or long-term events—neither of which matter much to markets. Instead, Ken believes events expected to unfold over the next 3 to 30 months are more relevant for markets.

While media headlines can affect sentiment, Ken explains how markets pre-price all widely known information. Therefore, he believes investors shouldn’t let scary-sounding media headlines impact their long-term investment strategy. Ken thinks it’s better to use media as a measure of investor sentiment rather than an indicator of future price movement. If headlines are pervasively negative, it may be time to be optimistic. Conversely, overly positive headlines may be a sign of trouble.

Transcript

Ken Fisher:

Have you ever had someone in your family like at Thanksgiving dinner or Christmas or just some time when you're getting together around a swimming pool during the summer down at the community pool, whatever it is, out at the lake, whatever it is, that's always wrong? That never gets it right? You know that relative? You get to the point where you just train to tune it out. So the fact is, people have always wondered how to think through media as it relates to markets.

Now, there have been a lot of books written in years past, but not recently, in how to read the news. But they're all kind of transitory because the news organs have changed a lot over time. And the reason to read the news is not what people think it is. Media and news is aimed at trying to be very either short-term. Here's the hurricane that happened on the other side of the world and what's going on about it and what's terrible and how many people died and the devastation and all that. Or about something that's long-term, like the kids are no good or climate change or something like that. And usually aimed at trying to grab your attention because in this day and age, they've got to get you to click online or subscribe. And that requires getting some drama in it. And they cover everything that they think of that might do this for you in terms of getting you to click online and read clicks and time spent reading. That's the big metric online. Clicks or page views and time spent reading those page views.

Now, here's the point that people don't quite get. Capital markets, all of them, the liquid markets that you know about, stocks, bonds, currency, crypto, you name it, are pricing almost everything we can possibly commonly know about before it comes out of our mouths or as it comes out of our mouths or very, very soon thereafter. And it's pricing them over a future that isn't about next week, today. It's really about the next approximate, give or take a little, 3 to 30 months. And in that 3 to 30 months, not the future like climate change or the kids are no good or the hurricane that just happened, in those 3 to 30 months it's pricing the economic future that will occur. Not really long-term. Not really short-term. Short-term is just volatility bouncing around. So when you hear and read all this stuff, it's telling you what already has or almost immediately will lose its power over pricing.

And your job is to largely see that as a measure of sentiment. These things have everyone upset? These things are priced. Are there a lot of things people are upset about? Are there a lot of things people are optimistic about? It's telling you more about sentiment now, then it's telling you about the importance of these things for moving markets because capital markets pre price all widely known information or knowledge or opinions. Facts. So in that you read it basically as a sentiment measure and you know that if sentiment is too high, that's a reason to be less optimistic because people have been throwing money at markets. If sentiment is too low, that's a reason to be more optimistic. Or as Warren Buffett said, "You should be greedy when others are fearful, and fearful when others are greedy." And the fact is you use media as a way to see are we too hype-y are we too fearful? Are people worried about these things? If they are, maybe I shouldn't worry about them.

I always say to people just like that relative, that's always wrong at Thanksgiving, when you see stuff in the media and you see your friends and everybody else worrying about it, whatever it is. "Oh, the Fed's going to do this. Oh, the war is going to do that. Oh the ooh, the ooh." When you see that, you should thank them. You should be grateful. Like it's Thanksgiving time for doing all the worrying for you so you don't have to. You should be worrying about something else. Thank you very much.

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