I was looking at the stock market opinion and analysis website called Seeking Alpha the other day and these were the two most popular articles:
- The Market Bubble is About to Pop
- Why This Rally Will Continue
The first article gave many reasons why the stock market is “headed for major trouble” and the “economy is far from being out of the woods.” The author cited substantial long-term headwinds and the irrationality of the recent rally. He said there will be a realization that higher-earnings will not materialize any time soon. Slow growth and higher commodity prices were also predicted. And he meant every word.
The second article outlined why these “green shoots” we keep hearing about will turn into plants and how “less bad” is actually pretty good. The second author wrote about how higher than expected earnings have provided the market with positive momentum. He also wrote that GDP growth is projected to be positive in the third quarter and more earnings “beats” could propel the market higher. He even admitted that although growth coming out of this recession would be slow, this is already priced into the stock market. And he also meant every word.
It struck me as funny that the two most popular articles offered diametrically opposed opinions about whether the stock market was going to go up or down.
Most of the information you read about the financial markets from day-to-day are often written by very intelligent and knowledgeable people, but when you add up all their intelligent, but contradictory, commentary, it tends to be just “noise.” The information could be valuable if you are a day trader, but more often than not, focusing on this daily noise usually leads to making irrational investment decisions based simply on fear or greed.
My opinion is that a long-term view is important. The importance of having a long term strategy and disciplined approach to fulfilling that strategy to investing for the long-term cannot be overemphasized. So, ignore the daily noise and stick to a strategic investment plan with a long time horizon and you’ll be better off in the long run.
