Market Volatility – much ado about nothing.

I’ve been contemplating about how the next financial “crisis” will unfold.  Specifically, how it will be different from our last “crisis”?

One new angle that has my attention is the speed of our news cycle.  It seems like we are voraciously consuming news these days in ever smaller bits and bites.  I like to watch big network evening news, and often do it via a DVR recording.  The result is that I am acutely aware of how the actual newscast is extremely front-loaded with smaller and smaller ad-infested stories filling the last 10 minutes.  I guess someone has done research on who is keen enough to remain dialed-in for the final 10 minutes, and has found an algorithm that maximizes add dollars and eyeballs.  I’d bet that many people have tuned out by the final 10 minutes.  Today’s population is so ADD that a 30 minute newscast is too much.

So how does the new news consumption pattern affect the financial markets?  Well for one, getting any airtime is tough given the constant stream of shenanigans going on in Washington.  What chance does a fact-based financial news story have in these times?  Not much I’d say.

The result is a series of small market “corrections” that seem to grab our attention for a short amount of time.  They do not stay in the spotlight long enough to induce bouts of panic selling like they used to.  So, if you are leery of being in the market post-2008, you hear a series of stories showing violent market drops.  This helps maintain your stance of staying out of the market.  If you are a ‘dip-buyer’, you see a series of 10% corrections that allow you to buy more at reasonable prices.  Again, it just reinforces your preconceived notions of how to invest/stay involved in the market.

What will cause these positions to change?  Big movements.

Big movements will get big airtime, and have big fundamental issues.  Until then, we will get blassé about all of these little corrections.  They will be much ado about nothing…….until they aren’t.

However, when the big one comes, you had better have your portfolio ready.  I think the speed and ferocity of the next crisis will hit us harder than the last.  It will probably last a shorter amount of time, but our hyped up cycle could be very tough on both your wallet and your tenacity.  Will you be able to stick to plan?