Have you ever noticed how market commentators always try to justify market moves with random explanations? If the Dow is up 200 points, it’s because investors are confident in the market and are no longer afraid of government policies. If the Dow is down 200 points, it’s because investors are fearful of a double dip recession and afraid of government policies.
Does anyone remember less than a week ago when all of the experts were claiming that the Dow was headed lower due to the poor jobs report? Now that the Dow rallied yesterday, they are all saying that the economy is getting stronger and things are improving. Did that much change overnight? Really…in just one week!
The truth is no one knows exactly what the market is going to do from day to day and for what reason. Trying to guess is like trying to grab water with your hands. It’s pointless. I guess financial programs feel the need to fill airtime with speculative theories for the market moving.
Investors could be selling stocks because they need the capital back or to book gains. Investors may be buying stocks because they think that shares of ABC Company represent a compelling opportunity. No one person knows what is going on inside the mind of millions of investors.
The best thing for investors to do is disregard commentator explanations for short term market fluctuations. So, next time you find yourself wondering why the stock market is selling off, remember that the person speaking on your television is giving you their opinion. Your best guess is as good as theirs. That’s why my favorite way to watch most financial television shows during market hours is with the volume on mute.