Media and the Stock Market Can Be A Recipe for Misinformation
Does media interfere with the stock market? Questions like this almost seem silly when looking at the world economy in these rocky times. Social media and other streaming news and media platforms have made people more informed of changes around the world. These changes often reverberate around the stock market which makes it difficult to know and understand the true consequences of what we are reading.
The History of Media Interference
Media has always played a part in the movements of the market. Once, in an unbiased past, the news reports were to inform people about the happenings of their cities, states, and countries. While there were still sensational stories, most reports were simply the facts of a situation.
Today, slanted media overdramatizes the slightest hiccup in the world market which has the consequence or negatively or positively effects the market. The current trade war with China sent people running to their brokers to sell their stocks as quickly as possible. While some of the tradings might have been justified, much of it was hyped up by the media about the incoming recession. They were operating through scare tactics by not making carefully considered investments, such as having a dividend investing strategy to protect investments.
While there may or may not be a recession coming, predictions and concerns are spread and distorted across multiple platforms so what is considered correct information is warped out of perspective. The crash of 1929 was set into motion by several factors. These factors included falling employment, the rapid expansion of the market, followed by the rapid sale of stocks when people saw the reported stocks going down.
“A run on the bank” was the popular phrase of the time. The informed people of 1929 saw the stock market beginning to slide on October 18th and by “Black Thursday,” the 24th, 12.9 million shares traded as investors tried to save their invested savings. The 1929 crash is an extreme case of market movement, but with the information reported daily, some of the catastrophes can be avoided.
Stock Market and Media in 2019
Not all media interference is bad. The people of today are more educated and informed. They also aren’t wildly speculating as they did in 1929. After the recession of 2008, many millennials approached the stock market with caution after watching their parents lose not only invested money in the stock market, but homes, jobs, and retirements.
While the millennials have entered the stock market, many are doing so in ways to protect their investments. They are using media as an information tool. They are better able to track the news media and make informed decisions through careful research.
Media giants like Facebook make their informed decision making harder. The algorithm used by Facebook selects only the news and media stories that relate to the profile as a whole. The selective news media steam does not provide the informed investor with a complete picture of the health of the country or world. It only provides a one-sided perspective.
The informed investor uses multiple news and media forms to track and make their decisions. They primarily use online resources such as nasdeq.com or yahoofinance.com, to read about the market and its changes. They are not immune to the media and its influence.
Because their primary resource is the internet they grew up with, their exposure to media influences occurs through the advertisements around the articles. They are unable to not see the ads on the sides of their screens.
How Media Interferes With investing
While some media influence is helpful, there are the overhyped new companies and products that hit the market and people invest in them as the “next best thing” which then causes losses when the stocks start to drop or are listed as overvalued.
When the Chinese commerce giant Alibaba released its IPO, investors around the world paid to pick up a piece of a company compared to the levels of Amazon. They are currently resolving a lawsuit for this overpriced investment. The lawsuit is still getting resolved for the amount of money people invested in a company that is still growing.
Investing is a smart way to build a portfolio and retirement. The problems associated with media are many and growing. They still provide the consumers and investors with information about what is going on around the companies. We just have to be smart and do our homework.