Are you guilty of doomscrolling?
I only came across this intriguing term recently.
And yet I recognized it instantly. Because I periodically catch myself scouring the media and the internet for bad news, crazy views and apocalyptic predictions.
The National Institutes of Health (NIH) defines “doomscrolling” as “a habit of scrolling through social media and news feeds where users obsessively seek for depressing and negative information.”
And those news and social media sites are happy to oblige. In fact, their algorithms work by examining the content we look at most and feeding us more of it. That can create a vicious cycle, the NIH says, which can lead to compulsive and extremely unhealthy behavior.
It’s not just algorithms, either. It’s also news directors. There’s a strong negativity bias that runs through the entire media from the extreme left to the extreme right.
These media outlets know that “if it bleeds, it leads.”
Alexander Green writes about that harmful bias on a regular basis – and how it can affect your mental health and your portfolio.
He often points out that this is the best time in history to be alive because most people in the West today are living longer, healthier, safer, richer, freer lives than any generation in history.
All true. But I’d like to narrow my focus to the short term, the economy and the financial markets… and suggest that today there are many more reasons to be an optimist than a pessimist.
First, the labor market…
Did you catch the April jobs report that was released on Friday morning?
There was nothing but good news there. Unemployment fell to 3.4%, which is near a 50-year low. And the economy added more than 250,000 jobs last month. Even better, wages are rising, with a 0.5% increase in hourly earnings – to $33.36 an hour – over the past 12 months.
And these aren’t part-time, low-wage jobs either. Full-time employment recently passed the pre-pandemic high. The full-time prime age employment-to-population ratio (the percentage of Americans ages 25 to 54 with full-time jobs) hit a two-decade high.
And the benefits are widespread: Unemployment among Black Americans is at an all-time low.
To be sure, over the past year we worried about a too-strong labor market and rising wages. That’s because those might trigger the Federal Reserve to hike its target interest rate higher to ward off inflation.
But it’s looking increasingly like inflation peaked late last year. It’s been falling since, albeit at a slower pace than the Fed would like. And the banking crisis that began in March – with three regional banks failing – did much of the Fed’s work for it by tightening credit conditions.
So it appears at the moment that the Fed is done hiking. At least the federal funds futures market certainly thinks so (pricing there indicates a 94% chance the Fed will pause).
And then there are corporate earnings…
First quarter earnings season is now winding down.
Most analysts had extremely gloomy predictions about earnings in the first quarter.
But they were mostly wrong. As of last Friday, 85% of companies in the S&P 500 Index had reported first quarter results. Some 79% of them beat the consensus earnings estimate. In the aggregate, companies have reported earnings 7% above estimates, which is higher than the 10-year average of 6.4%. That’s according to FactSet, which tracks all the numbers.
Three-quarters of companies reported revenue that exceeded Wall Street’s estimates.
Estimates aside, earnings were down 2.2% year over year, but the consensus before earnings season predicted they would be much worse. Even better, analysts expect earnings growth for the second half of 2023.
That’s very good news for your portfolio, as in the long run stock prices follow earnings.
Finally, markets…
The market has a habit of anticipating good news before it happens. It is the collective wisdom of millions of investors.
And that wisdom has held true once again this year. The S&P 500 is up 8% year to date and 15% since setting a low in mid-October. The Nasdaq Composite has performed even better – up almost 20% this year.
Not bad for an economy that we keep hearing is on the precipice of recession.
So stop the doomscrolling. It’s just not worth it.