Markets

Green Fisher: “What doesn’t fit is made to fit”

What is behind the DAX movement today? How do investors react to the published GDP figures? Welcome to the world of daily market analysis! If the stock market changes direction, the top headlines are simply adjusted.

The marmot greets again and again

What is behind the DAX movement today? How do investors react to the published GDP figures? Welcome to the world of daily market analysis! If the stock market changes direction, the top headlines are simply adjusted. Conclusive arguments are quickly at hand, because past price data provide facts. But is that really true? No, by no means!

Media need attention

Wild headlines may bring entertainment value, but unfortunately they don’t help you further when it comes to making your own investment decisions. The basic rule applies: stock markets have always anticipated the future development of the economy, a description of the recent past does not provide any valuable information for the future. Every market analysis tries to project the effects of current events into the future, but there is often no more than one expression of opinion. It is THE cardinal mistake for investors to interpret a “moment analysis” of the current situation as a route for the near future. Markets are often smarter and also extremely complex than individual opinions can describe. Incredible market movements are often described as irrational. This overlooks the fact that markets are much more rational than individual investors. But you have to learn to understand this mechanism.

Stock markets see the future – investors don’t

Stock markets are not responding to today’s headlines. They price in all known information in real time. This became clear once again with the example of the COVID-19 pandemic. When business operations in large parts of the western world were more or less shut down, the stock market had to process this brutal cut quickly and play through the changed future. That means catastrophic GDP cuts, devastating labor market data, wiped out profits and reduced corporate turnover. In a few weeks, the MSCI World Index lost 34 percent of its value. In the months that followed, various data points revealed the extent of the disaster, but the market was one step ahead. Based on the changed expectations, the near future was re-evaluated and there was a dynamic V-movement of the markets.

People always live in the moment

Human brains have not been “evolutionarily constructed” for the stock exchange. You live as a human being in the here and now. You can therefore set the clock that investors ALWAYS want to learn from the “latest news”, although that doesn’t really help much and does more harm than good. A person has to concentrate fully on the present in order to master the daily dangers. Even carelessly crossing a busy street can be fatal. The stock exchange, on the other hand, anticipates the future!

Conclusion

Don’t worry about what’s going on today or tomorrow. Stock markets play the future, they are not directed by individual opinions. It is better not to interpret the daily news as an investment guide, but as “entertaining background noise”. Invest long term and stay patient when the stock market behaves differently than you expected. Unlike the media, the stock exchange is not interested in the present, but only in the future!

You can request the current capital market outlook from Grüner Fisher Investments free of charge at www.gruener-fisher.de.

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