Why watching TV can cost you more than your licence fee

The only honest answer we can give to the question: What will be the outcome of the Brexit negotiations?, is we don’t know.   Anything is possible: No deal, second referendum, Canada plus, BRINO (Brexit in name only), you name it.  But if the markets get excitable, we suggest switch off the TV news and don’t panic.  Below we give two examples of how the media scared people into making bad investment decisions.

When stock markets fall dramatically, it is the main story.  There will be footage of desperate traders looking at screens covered in red numbers… that means losses.  There will be “experts” telling viewers what the bad news means for us.  Specifically on 24^th August 2015, the Chinese stock market was in such turmoil, it was threatening to cause havoc across the globe.  In the US, the Dow Jones, the media’s favourite US stock market index, lost 1,000 points in the first ten minutes of trading. Old guys with silly bow-ties were talking about financial Armageddon.  This caused panic among private investors who withdrew $19bn from the stock market, the second biggest day of withdrawals since the financial crisis…Big Mistake.

The Dow Jones is now over 50% higher and many of these investors would not have got back into the market because the days when the stock markets do well will not be the top story.

Here’s another example closer to home.  Remember waking up in the morning after the shock Brexit referendum result? The pound was falling like a stone and the FTSE 100 index was due to open a massive 8 per cent lower at around 5,800.  In other words billions of pounds wiped out from all our pensions.  The media fell in with this apocalyptic mood telling investors to put their tin hats on.  At no time was a serious expert wheeled out who might say “well the stock market is 15 per cent cheaper for American investors than it was yesterday, or that a cheaper pound is good for UK exporters”.  And you know what? By 3 o’clock in the afternoon, the market had bounced 7 per cent from its lows.

And despite being told that the negotiating process is plagued with uncertainty, that life will be difficult outside the customs union and companies are threatening to leave in droves, the sky hasn’t fallen in and the UK stock market is still significantly higher.  If you were taken in by sensationalist media and decided to sell your shares on the morning of the referendum, you would have missed out on these gains.

Brian Durrant