It seems that every few weeks, a new round of negative news seems to make its way into the headlines. Today’s news is the threat that the Ebola virus presents to our public health in the United States of America. It seems like we’ve heard this story before. In fact, it seems like we’ve heard it a few times. Do you remember the swine flu, aka The H1N1 virus? ? The avian flu? Every time there is a new virus or epidemic, and a few Americans die from it, the media wants to make it a major public health scare. While I do not want to underestimate the threat that a contagious virus could cause to our citizens or the loss of life from these diseases, the threat is probably not as big as the media would have us believe.
So what happened in the last couple of weeks? We went from a barrage of stories about NFL players abusing their wives and children to a barrage of stories about people being infected and dying in Texas hospitals and West Africa. The NFL issues seemed to have almost vanished overnight. With the predominance of sound-byte journalism, the media needs to get our attention and keep it with continuously more frightening or astounding information.
Every time we get a fresh round of negative news, it seems to have a major impact on our investment markets as well. This is a pattern that has repeated itself for the quarter century that I have been in the industry. Overreaction to the upside followed by overreaction to the downside. Even the folks who truly believe the investment game is rigged have had very profitable returns in the past several decades by buying quality securities and holding them through good and bad markets. To invest well for the long-term requires you to tune out the media and realize that around every corner there is going to be a new scare that will try to trip you up. Keep your head down and forge ahead.
We are in the month of October. Historically, the months of September and October have been some of the most volatile months for the stock market. In recent months, we’ve gotten some fairly significant economic news. The Federal Reserve minutes were released last week and interest rates are likely to continue to remain low for the near future. The federal unemployment rate has dropped below 6% for the first time since President Obama was elected. Personal income and spending are both on the rise. In case anyone hasn’t noticed, the housing market has also seen a major recovery and prices have rebounded significantly. The most common comments I hear from my realtor friends is that we don’t have enough inventory.
The bottom line is that we have survived public health threats, political crises, foreign interventions, energy supply interruptions and a financial crisis. The events of today will soon be history, the stock market will fluctuate and medical science will alleviate our pressing medical issues. Forge ahead and pay no attention to the crisis of the day.