Did it feel like the news cycle was extra noisy this month? You’re not alone. It’s been nearly impossible to escape this month’s headlines – trade wars, government layoffs, inflation worries, and big swings in investor sentiment.
Market Update
The markets have given up most of their gains this year and are now nearly flat since the election. A handful of sentiment indicators came in lower than expected this month, adding to investor concerns.
Interestingly, global markets are finally starting to have their moment in the sun. Despite concerns about tariffs and trade wars, both Europe and China have posted double-digit gains this year. Meanwhile, the once-dominant “Magnificent 7” tech stocks are down year-to-date as a group.
The Big Story: Sentiment Shift Driven by Washington
The biggest story this month wasn’t earnings – it was investor sentiment reacting to developments in Washington. Proposed tariffs, spending cuts, and layoffs dominated the news, raising concerns about potential economic ripple effects.
When uncertainty dominates the news cycle, it can have a very real impact. If you’re a CFO, small business owner, or even an employee facing a potential layoff, it’s natural to think twice about expanding your business, hiring a new employee, or making a large purchase. And when enough people hesitate a the same time, economic activity can slow down. Here’s a sampling of some headlines investors saw this month:
– Consumer Confidence Buckles Under Trump’s Policies
– US Business Activity Stalling, Consumers’ Inflation Expectations Surge
– The Federal Reserve’s Favorite Recession Indicator is Flashing a Danger Sign Again
Does that mean a recession is around the corner? Not necessarily. While the headlines sound dramatic, many are just that – headlines. Surveys and sentiment indicators can be highly political, with responses often varying based on political affiliation. Take a look at the chart below from the University of Michigan’s Consumer Sentiment survey – it highlights the stark differences in inflation expectations between Democrats and Republicans.
Also, many political announcements generate buzz but ultimately lack meaningful follow-through. It’s best to focus on the bigger picture.
With all this uncertainty, it’s tempting to react to every new headline. But making investment decisions based on economic headlines is often a losing strategy.
“To me, the political noise is just that – a distraction. I suggest you ignore most of what gets said, and focus on all the things that actually get accomplished. These are likely to include large tax cuts (TCJA gets extended 5+ years) and a much M+A friendlier FTC.
More importantly, pay attention to the broader context of where we are today. Back-to-back years of greater than 20% in equities strongly suggest we lower expectations for the following 12-24 months.
Context matters much more than noise.”
The market will always have noise, and the news cycle will always find a fresh source of anxiety. Stay disciplined, and don’t let the noise dictate your strategy.
And finally, ever wonder how much money songwriters make when one of their songs – written decades ago – gets picked up as the theme of a TV show? What happens when that TV show becomes one of the most rerun shows on earth? Devo’s Mark Mothersbaugh is making over $1 million per year of a song he wrote 50 years ago.
“The group’s debut album was released in 1978 with the Mothersbaugh-penned “Uncontrollable Urge” serving as its first track. Though the song didn’t chart particularly well when it was released, it received an unexpected second life decades later when it was made the theme song for MTV’s hit show “Ridiculousness”.
The comedy show has become one of MTV’s most aired programs and turned “Uncontrollable Urge” into Mothersbaugh’s main moneymaker over its more than 1,500 frequently rerun episodes.”
Not too bad for a guy who got started wearing a plastic flower pot on his head.
How MTV’s Ridiculousness Has Made Millions for a 74 Year Old Musician
