Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Hottest Sports Stock Of 2020 - 23rd Sep 19
Stocks Wedge At The Edge – Front And Center - 23rd Sep 19
Stock Market Top Almost Confirmed - 23rd Sep 19
Thomas Cook COLLAPSE! 300,000 Passengers Stranded, Flights Cancelled, Planes Grounded - 23rd Sep 19
Massive Stock Market Price Reversion May Be Days or Weeks Away - 22nd Sep 19
How Russia Seized Control of the Uranium Market - 22nd Sep 19
Dow Stock Market Trend Forecast Update - 21st Sep 19
Is Stock Market Price Revaluation Event About To Happen? - 21st Sep 19
Gold Leads, Will the Rest Follow? - 21st Sep 19
Are Cowboys Really Dreaming of... Electric Trucks? - 21st Sep 19
Gold among Negative-Yielding Bonds - 20th Sep 19
Panicky Fed Flooding Overnight Markets with Cash - 20th Sep 19
Uber Stock Price Will Crash on November 6 - 20th Sep 19
Semiconductor Stocks Sector Market & Economic Leader - 20th Sep 19
Learning Artificial Intelligence - What is a Neural Network? - 20th Sep 19
Precious Metals Setting Up Another Momentum Base/Bottom - 20th Sep 19
Small Marketing Budget? No Problem! - 20th Sep 19
The Many Forex Trading Opportunities the Fed Day Has Dealt Us - 19th Sep 19
Fed Cuts Interest Rates and Gold Drops. Again - 19th Sep 19
Silver Still Cheap Relative to Gold, Trend Forecast Update Video - 19th Sep 19
Baby Boomers Are the Worst Investors in the World - 19th Sep 19
Your $1,229 FREE Tticket to Elliott Market Analysis & Trading Set-ups - 19th Sep 19
Is The Stock Market Other Shoe About To Drop With Fed News? - 19th Sep 19
Bitcoin Price 2019 Trend Current State - 18th Sep 19
No More Realtors… These Start-ups Will Buy Your House in Less than 20 Days - 18th Sep 19
Gold Bugs And Manipulation Theorists Unite – Another “Manipulation” Indictment - 18th Sep 19
Central Bankers' Desperate Grab for Power - 18th Sep 19
Oil Shock! Will War Drums, Inflation Fears Ignite Gold and Silver Markets? - 18th Sep 19
Importance Of Internal Rate Of Return For A Business - 18th Sep 19
Gold Bull Market Ultimate Upside Target - 17th Sep 19
Gold Spikes on the Saudi Oil Attacks: Can It Last? - 17th Sep 19
Stock Market VIX To Begin A New Uptrend and What it Means - 17th Sep 19
Philippines, China and US: Joint Exploration Vs Rearmament and Nuclear Weapons - 17th Sep 19
What Are The Real Upside Targets For Crude Oil Price Post Drone Attack? - 17th Sep 19
Curse of Technology Weapons - 17th Sep 19
Media Hypes Recession Whilst Trump Proposes a Tax on Savings - 17th Sep 19
Understanding Ways To Stretch Your Investments Further - 17th Sep 19
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19

Market Oracle FREE Newsletter

How to Invest in the Esports Revolution

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.


© 2005-2019 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