Markets reporters reflect opinion in the market

Peter Atwater, president of Financial Insights LLC, writes on LinkedIn about whether markets reporters are overly positive or overly negative in their coverage.

Atwater writes, “In reflecting on Professor Garcia’s paper as well as Mr. Authers’ comments, I’d like to offer another possibility: the financial media, investor confidence and the markets all simultaneously mirror the same mood.

“As markets rise, investor confidence increases. Unknowingly, this higher confidence triggers perceptions of greater certainty and control among the media and investors alike. Cognitively, the brain is at greater and greater ease and System 1 thinking takes charge. As a result, with things going well, we require little third party explanation or validation. Good times don’t need a story, let alone encouraging, positive language. There is little the financial media can or need add to the cognitive sensation that good has become better and is on its way to best. For investors that the market was up and then up some more is itself self-affirming. Inherently investors want rising markets to be normal. In fact, ideally, rising markets should be so normal as to be altogether ‘un-newsworthy.’ So, after a few days, there is remarkably little for the media to offer.

“Late last year, one could see this ‘un-newsworthy’ behavior in real time. The first few days, in which the Dow hit new all-time highs, there were stories with bold-lettered headlines. That didn’t take long, though, before the positive articles fell away. There was very little for the news media to add after a week of new all-time highs. Again, the rising market itself provided all the affirmation investors needed.

“Falling markets, however, are a much different story. As markets fall, investor confidence decreases. Cognitive strain quickly develops and, as a result, narratives become vital as investors seek out reasons to be confident. Ironically, the media rarely offers that. As the media reflects the same falling mood and growing uncertainty as its followers, its own articles and stories become more negative as market prices decline. As peculiar as this may sound, by growing more and more negative, the media is affirming that investors are correct in their feelings of uncertain and out of control.”