What has been the biggest change to financial markets in the last 5 years?
The biggest change to markets over the last 5 years is just how much “fake information” moves financial markets on a daily basis. Rasmus Kleis Neilsen, Director of the Reuters Institute, who was a panelist at the Davos conference speaking on media, said that some of our fundamental problems concerning information will never be solved because powerful people will always lie, and we’ll always disagree over big grey areas of fact and fiction.
There are even more grey areas in financial markets and fake information has never been so real. It’s my job to cut through the fake news. I’ve become more skeptical about what I read about businesses and I’m more aware of the source and the author’s agenda behind their story. I agree with Rasmus that the “powerful people” will lie, especially when it comes to making money or avoiding losses. I’m surprised that there hasn’t been more SEC investigations into the spreading of fake news. In my opinion, it’s become just as bad as inside trading. It is very difficult to prove a partial lie in court and the best fake stories spread so fast that it’s hard to pinpoint ground zero of the story. Also, many of these stories eventually become fact, but what I have observed is that the fake news will usually be forgotten as markets move onto the next story that will move markets. There are many very experienced money managers that have written about how computer trading and the spreading of false information has impacted the way that they invest.
The best way to minimize the impact of fake news is to invest over the long-term and buy companies that either pay dividends or have the financial strength to pay dividends in the future. Dividends or reinvested profits into a business will always overcome the fake news that influence a stock price. I anticipate that the spreading of fake information will become even worse as we head into this election year.
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