Are You Spooked by Stock Market Headlines?

Welcome to "The Informed Investor," where we break down the latest financial headlines, bringing you research and insights to help you separate the news from the noise. Welcome to "The Informed Investor." Today we are calling it "The Terrified Investor." We are going to look at scary headlines in honor of Halloween. And the show is brought to you by Dimensional Fund Advisors, a global asset management firm bringing financial science to your investment experience. I'm Mark Gochnour. I'm going to be joined today by Dr. Wes Crill and Jake DeKinder. And in honor of Halloween, Jake. That's right. You look like a Texas ranger. I appreciate that, man. You know, we're here in Austin, Texas. You actually could wear this anywhere around Austin, and no one would say a word. I got my boots on too. Good-looking boots. Thanks, man. I feel like I could wear this anywhere in Austin too. You look like a PhD student. Yeah, this is what we dress up as. I actually didn't have any costumes available, so I had to borrow this hat, and I'm told it's a little bit small from my head. I have a huge head. Don't pass out on us halfway through, man. Yeah, feeling rough. And definitely don't your head. Wait, I love doctors, though, man. Come on, show the guns. Go baby. That's an eye candy. I was bigger in my playing days. How about that? I like it. And I have an embarrassing tan for being in Austin, Texas, where it's the sunshine for like 90 days in a row. Yeah, you should have gotten a spray tan before you came on. Yeah, I should have thought about that a little more. All right, gentlemen, we've got some scary headlines, and we're gonna go back in time and think about this as an investor's perspective. You know, we read some of this stuff and how do we think about this? So let's start 1979. August of 1979, and this was in the magazine "Business Week." It was called "The Death of Equities." I think it's one of the, I guess, maybe one of our more favorites. It's a classic. It's a classic. Yeah, because if you look at the time period 1965 through 1981, that 17-year time period, stocks haven't performed T-bills. Oh they had a positive return. They're, I think 6.3%. But if you read these headlines, and you get nervous, and you think, "Man, stocks have had their run. They're done. I'm out." The next 17 years, stocks were up 18%. Yeah. From starting in 1982. All right, so that's my scary headline to start out with, "The Death of Equities." I love it. You know, contrary to the belief behind that article, I don't think a lot of people gave up on the idea there should be an equity premium, but it is important for investors at least be aware that you can get those disappointing outcomes. Yeah, I mean we've seen that many times in the markets, right? Is that you do get these long runs. And I think, you know, that's the hard part is because occasionally, when you read about some of these headlines that we're gonna go through, they do get it right. But if you make enough predictions as we'll talk about, at some point, you'll probably figure it out. Somebody eventually will get it right. Exactly. All right, I'm gonna read one more and then we'll let you guys read some of yours. And so I'm gonna read this one, and I'm gonna come to you, Wes. "High anxiety, looming recession, government paralysis, and the threat of war are giving Americans a case of the jitters." All right, Wes, when do you think that came out? That would be the early nineties. That was 35 years ago, October, 1990. You are spot on. Boom. But it's just as applicable today, as it was back in 1990. All right, what else we got? Jake, you got a favorite? Oh, I got some. I have to put my actual glasses on because I'm blind as a bat, man. Now you're Jake the Cowboy, not the Texas Ranger. I guess so, we'll go with that. Okay, so wait, I got something from the '90s. This is good here. October '95, "Apocalypse Soon." February '96, "Aging Bull." August '97, "Don't just sit there, sell stocks now." '98, "Dow plummets 299 points, sell off brings concern of return to bear markets." September '98, "The crash of '98." By the way, I don't think there was a real major crash in '98. This is kind of interesting on this one though. so I think I started those with that October '95 apocalypse soon. If you look at a long term growth of wealth from that beginning of October in '95, you never even come close to getting back down to that level. Meaning if you got concerned and you were waiting for some pullback, it's not like you are so far from ever getting back to that October '95 level. And that's the hard part with a lot of these is you follow 'em, you get it wrong, you're waiting for that pullback. And more often than not, that market's just running away on you. I believe that time period, 1995 through 1999, that five year time period, was 28.6% for the S and P. As you're reading all these concerning headlines. Now there's an article here, I think you'll like, Wes, May of 1999. Yeah, I mean this is when you start to get into some of the wayward predictions for individual companies, and the title was "Amazon.bomb." You see what they did there? They changed the com to bomb? That was good. Yeah. That's creative. So yeah, they were basically being accused of being a glorified middleman. They would never be able to compete with the likes of Dell or some of these other companies. With the benefit of hindsight, it's pretty absurd. Apparently, Jeff Bezos trotted out this article a handful of years ago to sort of show like, "Hey, you guys have all these predictions about what's gonna happen. Here's what you said about my company once upon a time." So, you know, even with some of these companies, there was another funny one a few years later, where Apple was the target of this. It said, "Why iPod can't save Apple." Maybe they were technically right because it ended up being the iPhone, the iPad, the headphones, all these other things that were a really big deal. So kind of funny to read with the benefit of hindsight. All right, I'm gonna fast forward now to the financial crisis. In October of 2008, the headline was "Wild Day Caps Worst Week Ever for Stocks." And we talk about that a lot, Jake, like it's the worst sense or the best sense. But we used that to set one up. This one is in February of 2009. "No end in Sight for Equities' Bear Hug." And that was February 24th, 2009, about two weeks before the absolute low before it really went on a tear. And I think March 9th was the low. It was. From the financial crisis. I think that's right. As well. Yup, could not pick worst timing to get out of stocks. Worst time to get out of stocks. But again, that's the challenge with these headlines is it is scary kind of going back to the theme here, and it can impact your emotions here because everything that, a lot of these things that the headlines say, they seem plausible as if you, know things, are bad and it can get even worse but you just don't know. And Jake, you always talk about even if you knew what's gonna happen in the future, you're never sure how market's gonna react to that. Yeah, completely. In fact, you know, you made Wes guess on a couple of those headlines of like when that article was written. I mean, that literally like we could have pulled that from this morning, you know, on the one because there's always sort of this concern that's out there, major events that's out there. I actually find it interesting to go back and look through the years on what were the major events and what were the major headlines? And you don't have to go back that far where literally, you cannot remember what was taking place. And at the moment, it's the biggest deal. Wes, I think you got one of your favorites here. This is hilarious. Okay, well you guys are gonna know the date. I won't play that game, but this title is "Bubble Warning, Why Assets Are Overvalued." Now this was in January of 2010. This is not January of 2000 when PE ratios were actually pretty high for the US market. January of 2010 so at the end of 2009, the PE ratio using the Fama French Index for the US was 15, was 15.1. The long run average is 17.3. So it's actually cheaper than the long run average. And at that point, we had actually come out of a long stretch where the US market had been underperforming. Of course over the next five years, annualized return on the US stock market using the S and P was over 15%. So that, again, we talk about a fearful headline, that would've been a very bad time to get out of stocks. I feel like every year or two, and correct me if I'm wrong, I feel like I'm always reading the overvalued in some way article and to your point there, like it's below the long-term average, and they're still writing the same article. Like that's one of those classic ones they just pull off the shelf every, you know, 18 months or like insert here, valuations are too high. It's, I mean it's the same article. Well it's kind of funny because this is what Market Equilibrium literally implies is half of the people think the market's too high. Half of the people think the market's too low, and they meet in the middle. And that's how equilibrium gets established. Jake, I think this is, this may be your favorite. I love this headline. I do. This one, this is August 7th, 2011. "Why The Debt Crisis is even Worse than you Think." And you know, the reason that I really liked that one is that was the first time the US debt was downgraded. And I love to reference that. In fact, a lot of times, I'll ask a room of financial professionals. I'm like, "Hey, remember when the US debt was downgraded?" And they're be like, "Oh yeah, in the last couple of years." And I'll say, "Is that the first time it was downgraded?" And it's like deer in headlights. I'm like, wait, at the moment again, it was the biggest deal. And yet we get a decade removed and people literally can't even remember when the US debt got downgraded. And by the way, markets continued on just fine. All right, let's keep going here. August, 2018, this is my favorite, "The End is Near." So that was 2018. Now guess what the market did in 2019? Plus 31.5%. Ooh. That'd be a tough one to miss as well. That'd be a tough one. Listen, and then we get into COVID, you know, and there's all, we know what COVID was like. There's a lot of stuff happening here, but here's a headline that, again, very concerning with stuff going on all around the world. This was August of 2020, "A new global depression is coming," and it was seeming that way, right? The economy around the world essentially shut down. Mhm. And so naturally, you can think about this potentially happening, but quite the opposite happened as well. That's wild 'cause as of that date, the three month return on the global stock market was 19%. It's pretty good for three months. And you know, you had that amid all this consternation around what was gonna happen. Again, it's not to imply that the world wasn't in a rough state of affairs at that point, but I think when you're reading these headlines as an investor, you're probably thinking "What should I be doing about it?" And again, as is often the case, probably nothing. Yeah, we talk about this all the time. What you're experiencing as a human being, as a citizen, as a parent, any of those things, can be very intense, and it can be very stressful. And that's the reality of the world. It's that classic, when you let it carry over to money decisions, that's when you can run into some problems. I'm gonna read a couple recent ones here, and then we'll get into some other things we're worried about here today. Yeah. All right this was December, 2022, which was a really, really odd year in the sense that both stocks and bonds got hammered badly in the same year. But this is December, 2022. "High rates, recession are in the cards for 2023." Here's the headline in May, 2023, "A recession is brewing. It will be lengthy." Now here's a headline in January, 2024, "What recession, question mark. Growth ended up accelerating in 2023." So you just never know. Mhm. Even though things are very concerning, you just never know how some of these things are gonna work out. But let's talk a little bit about where we are today and just go down the list of what are the things that we're worried about today as an investor? Jake, we were just talking, you're in Tulsa, I think. Tulsa, Oklahoma. Last week, and you're doing a bunch of different client events. You do a lot of different speaking as well, where we get questions, "I'm worried about X." Like what are the things that we hear most about right now? Oh, I'll go down the list. So yeah, I mean this was both end investors as well as financial professionals. Let's see here, tariffs. Tariffs, collapse of the US dollar or replacement as global reserve currency. Valuations, that one came up all the time. Wars, geopolitical event, political events, level of U.S. debt, looming recessions, trade wars, problem in the banking system, continued concern about inflation. I mean, at that client event that I had, it was just one after another of "What about this? What about this? What about this?" And I think that's to our point here, there, you know, there's always concern that you can find, and there's always uncertainty that's out there. But again, why do you get the return? You bear the uncertainty, and I don't really care what form it takes. But also thinking down that list, you know, Wes, you've written a lot in the last couple of years, and I literally feel like I'm just reading the last five or six years of the articles that you've written about. Yeah, I was just thinking those are very evergreen sounding topics. You know, a lot of the client meetings we've been doing really for a decade, have been focused on some of these same issues. I guess tariffs is probably an exception, where that was a little bit more of the here and now. But yeah, it's really the same kind of concerns that keep bubbling up. And you know, that's why, I mean, I hate to sound like a broken record. In fact, part of my job is to think of new and creative ways to say the exact same thing over and over, I feel like, but it is true to a certain extent is, you know, the stuff that was worrying people five years ago is likely to bubble up again. And it's like, okay, what are the lessons I learned from last time, and how can I think about that going forward? You know, when you analyze markets enough, when you look back at all of these headlines, you almost do get to the point where you do feel like a broken record. 'Cause you're just repeating the same stuff over and over and over again. I mean, there's only so many different forms that some of this stuff can take. And don't get me wrong, we say this all the time of it will be different, and it will be unprecedented. And there will be something that's new, but you sort of come back to, so what are you supposed to do about it? I liked what you said earlier too about it's very natural to have concerns about all these different things. Yeah. Right, as a citizen, it may be an impact it has on a family business or what have you. But separate that from the decisions as an investor. Because to your point, what do you do? Yeah, it may be different, but everything you're worried about, that whole list you just read, everything's out in the press already. All that stuff's known. So it's somewhere, it's already reflected in prices. The problem with some of these headlines, is people absolutely make decisions with their investments and oftentimes, they miss out on some of these incredible returns that follow these periods of really concerning time periods here. So that's the frustration I have with some of these headlines is people do have some very unfortunate experiences. I guess a goal for this show is when people start reading these headlines, they think of about it as not investment advice, but that's just the media selling advertising, right? And there's nothing wrong with that. It's incentives. You have to emotionalize the story to get clicks and reads and things like that. And that's a business they're in. And there's nothing wrong with that. It's just as a reader, be more clear about that, that that is not true investment advice. Now let me read this one, and I'll get your thoughts on this with where we are today. This is a book that just came out in this month, October, 2025. And I have not read the book by the way, but we are getting a lot of questions about the book. And it's titled "1929: Inside The Greatest Crash in Wall Street History" by Andrew Ross Sorkin. And I think my understanding of the book in reading about some of the reviews is it's sort of comparing and contrasting the things that went on in the Great Depression, 1929, versus hey, some of the warnings or signals perhaps where we are today. And so a lot of people are having a concerning reaction to that is what if? You know, we have another great depression? You only have so many data points and so many observations of these events that are taking place, and you've said this, stock market data is historically really noisy. So you've got a really noisy data set. You only have a couple instances where you can try to make comparisons to these different events. I mean, is that a fair way to look at it? It is. I mean that's, you know, especially when you're talking about recessions, you've only got a handful of those really in the whole history of the US stock market. So if you're gonna say, okay, what's gonna predict those? Well, it becomes pretty challenging. You know, I think one of the ways, by the way, you know that this industry is really opening itself up to fear mongering, what do they call the official announcements of IPOs even going back to the thirties? They call 'em tombstones. Mhm. You were just waiting, you were just waiting to break that one out, weren't you? Just sitting on that one for literally minutes. Well, and I'm looking behind you and I see several tombstones right there, so well done. Jake, you mentioned earlier the idea of people out there making predictions, and there's probably thousands, millions of people predicting X, Y, Z is gonna happen. So naturally, someone's gonna get it right. I always like to joke, my father-in-law, he called the '08, '09 recession. He just called it about 20 years earlier. He said a crash is coming, and eventually he got there. He missed out a lot of returns over that time period because he was worried about this potential crash. So eventually, he got it right. It just, he never put a timetable on it. It's the same thing with those recession calls, right? You know, say, "Oh, recession is brewing." I mean the average duration of a economic expansion in the US has been like five years. So you're like, okay, if you hang around long enough, you're gonna get a recession call, correct. That's right. Well, it's also, and we talk, I mean incentives, right? Like if you need to sell back in the day magazines. Now, you need to sell basically people going to any article that you've written on any platform that's out there, any social media, how do you do it, right? You sensationalize it, you play on emotions, you play on fear, you play on greed, you make predictions. You know, if you have a sort of like this classic buy and hold works really well, stay diversified, keep your costs down. That's boring, right? No one's going to read your article. You know, a lot of the headlines we were talking about here are the scary ones, right? Doom and gloom. I'm gonna read a positive one. Now, this one, oops, sorry. I'm gonna read a positive article here. This came out in the Wall Street Journal in May of 2024. And the headline was "The Dow Jones Industrial Average Tops 40,000 for the First Time." And so again, we talk about that, the first time for X, Y, Z, and it hit 40,000. I mean, there's nothing interesting about that other than that's just markets going up over time. But I'll go back to, and you guys remember this book, Harry Dent? Oh yeah. "The Roaring 2000s Investor?" That book came out in 1999 and he predicted the Dow would hit 40,000, and he predicted it by 2008. So it got there. He was just many, many, many years early. So again, as readers, you're always gonna hear about these predictions. Somebody might get it wrong, somebody might not get it wrong, but what do you do in the absence of knowing the future? We always just go back to that. It's like what you said, if you put it in the magazine, have a plan, stick to it, control your emotions. You could hit, you could hit play on us saying that on almost every single episode. But it's a hard thing, right? Like you come back to these fundamentals of how you can increase your chances of having a good investment experience. And a lot of what it is, quite frankly, is like, it's like eating your vegetables and getting some sleep and exercising. You just do the basic blocking and tackling over and over. And you're probably gonna be better off than a lot of people that are playing a different game. I mentioned gold. Yep. Because Pop 4,000, we're getting a lot of questions. "How do I think about gold going forward?" So that is going to be a future episode. One other thing we want the listeners to be aware of, Jake, you're doing a webcast coming up here November 11th with John Cochrane. He is the author of "The Grumpy Economist." Yes. He's a senior fellow with the Hoover Institute. Really, really impressive. Really, really well respected as an economist. And man, if you wanna learn something about stuff going on, that's a must-watch episode. We've had Professor Cochrane on before. He does just a great job. He gives honest responses, it's quick hit. And you know, in the prep call with him, thinking about what we're gonna cover, it's a lot of these scary headlines that we're talking about. We're gonna talk about US debt, we're gonna talk about the economy and growth, we're gonna talk about inflation, potential recessions, we're gonna talk about tariffs, right? All of those things that really do get people riled up, and he's got a great perspective on it. So November 11th, make sure you tune in for that one. All right guys, that was a lot of fun here, trying something a little bit different with scary headlines and sort of costumes. A little bit. Sort of. Yep. All right, everybody be sure remember, November 11th, go to the webcast we have at the bottom there in the notes. You can see our link where you can register for the webcast with Jake and Professor Cochrane. And then stay tuned also for an episode on gold and be sure to hit subscribe. So thanks for joining us today and have a fantastic and safe Halloween.