Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
America’s Fastest-Growing Stocks Have This One Thing in Common - 26th Sep 18
The Post Bubble Market Contraction Thesis Receives Validation - 26th Sep 18
Best Ways to Finance Your Studies in Abroad - 26th Sep 18
5 Weirdly Lucrative Businesses - 26th Sep 18
Gold – “Make Me Feel Good…Tell Me Anything” - 25th Sept 18
Sector Rotation Continues. Bullish for Stocks - 25th Sept 18
Whose Trillion is it Anyway? US Federal Government Shocker! - 25th Sept 18
Focus on the Stock Market’s Price Action and Ignore the Failed Hindenburg Omen - 25th Sept 18
5 Problems All Restaurant Owners Will Face - 25th Sept 18
Gold Price Trend Forecast 2018 - Video - 25th Sept 18
How the US Dollar Penalizes Emerging Asia - 24th Sep18
Stock Market Macro/Macro View: Waves and Cycles Part II - 24th Sep18
DJIA Makes New High  - 24th Sep18
Gold Price Trend Forecast 2018 - 24th Sep18
The Stock Market Has Been Exceptionally Strong this September. What’s Next for Q4 2018 - 24th Sep18
Gold / US Dollar Inverse Trend Relationship Video - 23rd Sep 18
US and Global Stocks, Commodities, Precious Metals and the ‘Anti-USD’ Trade - 23rd Sep 18
Gerald Celente Warns Fed May Bring Down the Economy, Crash Markets - 23rd Sep 18
Top 3 Side Jobs for Day Traders - 23rd Sep 18
Gold Exodus to Reverse - 22nd Sep 18
Bitcoin Trader SCAM WARNING - Peter Jones, Dragons Den Fake Facebook Ads - 22nd Sep 18
China Is Building the World’s Largest Innovation Economy - 21st Sep 18
How Can New Companies Succeed in the Overcrowded Online Gambling Market? - 21st Sep 18
Golden Sunsets in the Land of U.S. Dollar Hegemony - 20th Sep 18
5 Things to Keep in Mind When Buying a Luxury Car in Dubai - 20th Sep 18
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB

Market Oracle FREE Newsletter

Trading Any Market

Stock Market and Economy False Narratives That are Just Wrong

Stock-Markets / Stock Markets 2018 Aug 06, 2018 - 11:53 AM GMT

By: Troy_Bombardia

Stock-Markets

I love debunking false narratives, mostly because these narratives do nothing but hurt the investors and traders who read them. E.g. if you’re an investor who’s constantly reading permabear narratives in this environment, you’re going to miss out on the stock market’s gains.

Here are some false bearish narratives that I’ve noticed from fintwit over the past week.

*If you haven’t already, feel free to follow me on twitter ;@BullMarketsco


False narrative #1

Brought to you from permabear David Rosenberg:

Look out below! The non-manufacturing ISM business activity index just fell the most in any month since…November 2008! Eighty percent of the time when it declines this much we’re either in recession or crawling out of one.

For starters, the month-to-month fluctuations in non-manufacturing ISM are notoriously noisy. Focusing on the month-to-month fluctuations = losing sight of the forest for the trees.

Also, it’s important to remember that any reading for ISM above 50 represents “growth”. ISM growth may have fallen from the month before, but it is still growing. Also, this economic indicator is not useful. It is far too noisy.

False narrative #2

Real wage growth is nonexistent. This is bad for the stock market and economy.

Except history proves otherwise. Real wages have been stagnant for the most part of the past 40 years. Yet the stock market continues to grow and the stock market continues to go up. Why?

Because “the economy” is not real GDP per capita. It’s real GDP. In other words, an economy with zero real wage growth can still grow if its population is increasing. Moreover, not all economic growth goes towards wages. A large part of it goes towards corporate profits.

Real wage growth has very little impact on the stock market and economy. Real wage growth has been stagnant over the past 30-40 years while the stock market has soared.

False narrative #3

The federal debt and deficit are exploding! The economy and stock market will blow up!

People said the exact same thing in the 1980s when Reagan’s exploding deficits were supposed to be “disastrous”. 30 years have come and gone, yet the U.S. economy and stock market have not been “destroyed”.

The rising U.S. federal debt and deficit have not stopped in the stock market from going up in the past.

False narrative #4

The stock market’s analogue is “copying” a crash pattern

Most analogues are just silly. The market doesn’t have a mind of its own. It doesn’t want to “copy” another market.

Here’s an example of a “the stock market will crash” analogue. This analogue is ridiculous. Silver in 2011 has nothing to do with the stock market today. These are 2 completely unrelated markets.

You can always make the market “look like” it’s going to crash by squeezing, compressing, or stretching completely unrelated markets.

False narrative #5

“If the stocks that have been leading the bull market start to break down, that is a major sign the market has topped.” -William O’Neil

FANG stocks have led the stock market’s rally, and are now falling. This is not bearish. The leaders don’t always stay the same in a bull market. Sector rotation is completely normal. Sometimes sector X will lead, then sector Y will lead, then sector Z will lead, then sector A will lead. There is nothing bearish about “the leaders starting to break down” because new leaders will emerge.

False narrative #6

Oil is a drag on the economy and stock market

For starters, oil prices have not “exploded to $100”, contrary to what the doomsayers predicted (remember Jeff Gundlach’s prediction a few months ago?). Moreover, real (inflation-adjusted) oil prices are still lower today than where they’ve been for most of this economic expansion. If anything, oil prices are rather low right now. This is not a drag on the economy or stock market.

False narrative #7

The stock market “looks like” it’s in a bubble because it’s going parabolic.

This is just stupid. Anything “looks like” a bubble when you use a linear scale. Here’s the S&P 500 on a linear scale.

False narrative #8

The stock market is completely relying on FANG. If FANG is done, the entire stock market is screwed.

Yes, FANG companies are big (Facebook, Amazon, Apple, Netflix, Google). But as a percentage of the S&P 500’s total market cap, there’s nothing usual about FANG’s weighting. The stock market isn’t “completely relying on FANG”.

Conclusion

A little common sense goes a long way. Unfortunately, common sense isn’t always abundant in the finance industry. This is partially because people lose sight of the forest for the trees. The other part is that the finance industry has an incentive to scare you – bearish headlines drive 5x the number of clicks vs. bullish headlines.

Click here for more market studies

By Troy Bombardia

BullMarkets.co

I’m Troy Bombardia, the author behind BullMarkets.co. I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Copyright 2018 © Troy Bombardia - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules