In looking back at the major news events during 2016 we thought it worthwhile to reflect on how the media affects markets and investor expectations and emotions.
US election in November 2016 – leading into the home stretch all reports predicted Hillary was a sure bet, there was no way Trump was going to win. Thinking back further to 2015 and the Republican primary nominations when Trump was included as a nomination the media reaction was you must be joking…
Brexit in June 2016 – this took some time to become major news in Australia, but when it did in the days before the referendum the reports were clear – an exit was not going to happen…
The US election and Brexit both resulted in the predictable onslaught of doomsday 24/7 media coverage and ‘what you need to know’ articles e.g. markets to crash, economic recessions to hit, sell out now etc etc.
Given the media noise there was an initial negative reaction and markets took a dive. Whilst the long-term results of both events have not yet played out in both situations the market bounced strongly in the weeks following both events.
In Australia (ASX 200) in the 3 days following Brexit the market fell 3.3% but over the following 30 days it was up 8.1%. Post the US election the market fell in one day by 1.9% and since then is up over 5%.
Events such as these (and numerous others before them) provide a good reminder to keep short term ‘noise’ in perspective and not to react. Investing is a long-term strategy and the key to a successful investment experience is to focus on the things important to you and what you can control.