‘Managing your emotions through the noise’.

Amicus Investment Adviser Tom Stanley has recently reviewed what’s happening in the market but instead of listing everything that’s happened, he want you to pay attention to the idea of ‘managing your emotions through the noise’.

In the past week or so there has been a slew of negative headlines spanning: interest rate pressure from both local and international reserve banks; warnings of contagion on defaulting Chinese property developers; a pull back in markets (be that stocks, commodities or even crypto-currencies) – All while we manage our way through the Delta outbreak in NZ. A lot to process for even the most informed and diligent investor – Some of the headlines that drew Tom’s attention were:

  • ‘The Global Housing Market Is Broken, and It’s Dividing Entire Countries’ – Bloomberg (20th Sept 21)
  • ‘High Pressure Week For Global Markets Starts With Steep Losses‘ – Bloomberg (20th Sept 21)
  • ‘Dow Futures Tumble More Than 500 Points as September Slide Intensifies‘ – CBNC (20th Sept 21)
  • ‘Prepare for higher interest rates‘ ASB Economics (23rd Sept 21)
  • ‘World shares sink as China Evergrande contagion fears spread‘ – RNZ (21st Sept)
  • ‘Potential collapse of Chinese property developer Evergrande could hit Australian iron ore exports‘ – The Guardian (Sept 22nd 21)
  • ‘Crypto Markets Suddenly Lose $250 Billion In Value As Evergrande Turmoil Pummels Bitcoin, Ethereum And Other Major Cryptocurrencies’ – Forbes (20th Sept 21)

How do these headlines make you feel? Stressed, anxious or fearful? Jim Parker of DFA hits on the unfortunate reality around the media and purpose of these triggering headlines:

Journalists define news as what’s novel, startling, eye-catching, unusual or conversation-starting. Media companies use news to maximise attention and help their clients, the advertisers, to sell their products and services to you.

In his June 2018 note Ten Years, Twenty Headlines, Jim quite rightly outlines that “Daily market headlines can challenge your discipline and tempt you (as an investor) to act. When the news unsettles you, consider the source and maintain a long-term perspective.” Jim does a great job of looking back at the provocative language used by the media to capture your attention and ignite an emotional response. A lot of water has gone under the bridge since this note was written in 2018, but the message remains painfully on point.

So, how do you see through the noise and focus on what matters? In Jim’s note he outlines a 6 step framework for assessing news headlines. The final step of this framework is to “have an Investment Advisor who can keep you disciplined and true to your original (investment) intentions” – If you’re reading this note, you are on track already, Amicus are your Investment Advisers and are here to help.

Our role as advisers is best summarised with the below graphic.

At some point, the headlines may get to you, and you will likely face your “Big Mistake.” Often in the form of buying high and selling low. It’s only natural. When the market drops, our instinct is to sell now and stop the pain. When the market shoots up, we tell ourselves it’s time to buy, buy, buy. However, our odds of avoiding The Big Mistake go up dramatically when we have a good advisor. Preventing you from making The Big Mistake is our primary job, so don’t be afraid to reach out.

Happy reading, stay safe and don’t forget – We are Locals, Investing for Locals, and here to help.

If you have any questions or queries, contact Amicus today.

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