Don’t Let Headlines Hijack Your Financial Plan
In the age of the 24/7 news cycle, it’s hard to avoid alarming headlines – especially when it comes to markets. The media often frames events in the most dramatic way possible.
Why? Because fear sells. While news outlets still aim to inform, many are now driven by ratings and ad revenue. The louder the headline, the more attention it gets.
But here’s the truth: While headlines are good at grabbing attention, they don’t always tell the whole story. Many times, the market doesn’t respond the way the media predicts. In fact, history has shown us that the market often rebounds faster and stronger than the media would have you believe. Let’s step into the time machine and look at some examples where markets showed resilience despite scary headlines.
Black Monday: On October 19, 1987, the Dow Jones Industrial Average (DJIA) fell -22.61% in one day. Media outlets predicted a global financial meltdown and a permanent loss of confidence in equity markets. Meanwhile, the U.S. economy avoided a recession, and some U.S. indices (like the S&P 500) finished positive for the year. The DJIA recovered to its pre-crash high in early 1989. In the aftermath of Black Monday, regulators implemented “circuit breakers” to halt trading during extreme volatility (this happened during the 2020 crash) and improved coordination across markets.
Y2K: The Y2K scare unfolded during the months leading up to the turn of the 21st century. In 1999, media outlets widely predicted that Y2K could trigger a global market crash and even encouraged people to stockpile essentials like food and water. Thanks to global preparation, Y2K passed without any major disruptions. Markets did decline later in 2000 due to the burst of the dot-com bubble, but there was no Y2K-related crash.
U.S. Credit Rating Downgrade: On August 5, 2011, S&P downgraded the U.S. credit rating from AAA to AA+ for the first time in history. The media warned of a weaker U.S. dollar and a deep recession. On the next trading day, the S&P 500 fell -6.66%. But there was no recession, no global financial crisis, and the U.S. remained the world’s most trusted borrower. By early 2012, the S&P 500 and other major indices had recovered.
Brexit: In 2016, many media outlets forecasted a global financial crisis if the UK voted to leave the European Union. Over the two trading days following the vote (June 24-27, 2016), the DJIA fell -4.89%. But the U.S. economy experienced no recession and the DJIA recovered in a few weeks.
There are plenty of other examples. See the following chart for more smart-sounding reasons to sell stocks during a period when the market went up 117x.
While headlines may grab your attention with worst-case scenarios, they shouldn’t be the basis for long-term financial decisions. The news cycle thrives on urgency and drama. Markets have weathered countless storms, and history shows that staying the course beats chasing every alarming headline.
