There’s No News Like Bad News

Wall Street forecasts for global GDP growth, earnings, and stock prices run the gamut for 2016. That means there are intelligent, well-reasoned analyses for both optimism and pessimism regarding where stock prices are headed. Why then, do negative headlines garner more attention and airtime?

 

The answer lies in a 1979 Nobel Prize winning study showing the overwhelming majority of investors dislike investment losses more than they like investment gains. This is the investing version of human history where threats to our survival have always been more urgent than opportunities to do something more than just “survive.” Be a pessimist and you’re a market sage who manages to peer past the obvious. Conversely, optimists, like Wharton Professor Jeremy Siegel, personify those negatively viewed as “perma-bulls” for traditionally positive outlooks of the stock market – a view Professor Siegel has held since the 1980’s. An inconvenient truth for the pessimists though; since the 1980’s the S&P 500 has increased in value 1,573%. Absolutely, it pays to invest with caution, but don’t let too much pessimism keep you from making money.

 

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