Bailout

Why market reporting should be ignored, part 912

By Felix Salmon

If you search the NYT for the phrase “Wall Street Follows European Markets Higher”, you’ll find this morning’s stock report at the top of the results list. Follow the link, and you’ll find the latest version of the report; the headline has changed to “Shares Rise as Worries Over Greece Ease”. But go back to that search-results page, and see how the story is described there:

Traders reacted to strong earnings from Barclays but remained wary about the Greek debt crisis and the response from the European Union.

This morning, then, US stocks were higher because of strong earnings from Barclays, but despite worries about the Greek debt crisis. A couple of hours later, they were higher — or so says the headline — because worries over Greece are easing.

Did US markets go from being worried about Greece to seeing their worries ease about Greece, all in the space of a couple of hours, and all without moving very far? I suppose it’s possible, but there’s no reason to believe in such things. Instead, pace Occam, the easiest and most obvious answer is normally the correct one. Market reports are meaningless; they can and should be ignored.

Are markets worried about Greece? Are they rallying as their worries about Greece ease? The answer is that anthropomorphizing markets in this way is supremely unhelpful. It’s just not often as obviously unhelpful as it was today.

Full post as published by Macroprudential on February 16, 2010 (boomark / email).