Why stock market reporting should be treated with caution

Photo: AP

US stock markets sank, bobbed upward, and ultimately sank again on Monday, in what many financial journalists and Wall Street bigwigs described as a “wild ride” worthy of the history books. The reporting on what the numbers meant was as dizzying as the markets themselves. Often ominous horse-race journalism charted the swings and searched for a culprit, while mellow explainers tried to ease and guide long-term investors. By the New York Stock Exchange’s 4pm closing bell, a fundamental question remained: What the hell is going on?

There was plenty of conjecture from traders and reporters alike, but nobody had a concrete reason for the drop in stock prices, never mind what it signaled. Volatility sweeping markets across the world is undoubtedly newsworthy. But the subject’s complexity barred journalists from offering too much clarity, beyond what could be taken from hard numbers and well-founded, if unproven, analyses.

 

Sign up for CJR's daily email

 

That makes hectic days like yesterday tough for financial journalists. “People want two things: What’s happening and why,” says Greg David, who directs the City University of New York’s business and fiscal reporting programs. “So you have to make your best guess at why it’s happening.” Possible causes included Greece’s financial troubles, a bursting tech bubble, and a natural reaction to a prolonged bull market. Most stories pinned the global chaos, which started to affect trading last week, on China, whose Shanghai market index plunged yesterday to a depth not seen since 2007.

By the evening cable-news circuit, despite some decent journalism, it became clear there would be no big breakthrough in the coverage. During a special report, CNBC’s Jim Cramer declared the day’s numbers “meaningless.” His colleagues, like others journalists, reported stories and interviewed guests but, most strikingly, continued to express shock over a “historic day,” in which the country saw “a multi-year stock market cycle occur within 15 minutes.”

As is often the case, the best reporting was rich with context. Those stories detailed the low number of Americans who own stocks, past plunges that didn’t bankrupt the world, and what the different stock indexes—like the S&P 500 and the Dow—actually are.

Casual stockholders were likely more concerned with how this could affect their retirement accounts. Stories flooded the internet, urging readers to hold off on selling their stocks. The posts cautioned that the fearful would cash out near the bottom and miss gains made early in the anticipated rebound. “It’s really important for reporters to convey to their readers that the market can be a nervous creature—that in the long term, history shows us that it eventually recovers,” says Lou Ureneck, Boston University’s director of business and economics journalism.

It’s hard to trust reports that claim there’s nothing to fear. CUNY’s David says those stories might have missed the mark this time, especially if they didn’t include a number of caveats that, to him, indicate things might worsen. He damned these articles as the “predictable advice” of stockbrokers and investment advisers, who have a vested interest in propping up stock prices.

The consensus among journalists seems to lean toward encouraging investors to relax and wait this one out. But how can lay readers be expected to judge one seasoned financial reporter’s opinion over the other?

Turns out, in this case, they don’t necessarily have to. Most Americans don’t deal with stocks intimately enough to warrant a constant eye on financial news, just as most people don’t need to check their 401(k) every day. Plus, heavy stock market swings—and the daily ups and downs—are connected to the US and global economies but don’t represent their health, experts say.

“I’m not sure why the local Fox affiliate needs to lead their news tonight with a stock market turmoil story,” FiveThirtyEight’s chief economics reporter, Ben Casselman, said Monday. At least not yet. That’s good news, since general assignment reporters tasked with covering such an intricate issue are liable to breed more confusion.

Financial journalists had every reason to vigorously cover the wailing markets of yesterday. That’s true today, too. But until market reports nail down the bigger story hovering above this instability, most people don’t need to stay glued to the coverage. Casselman makes a strong argument for that being true most of the time.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Jack Murtha is a CJR Delacorte Fellow. Follow him on Twitter at @JackMurtha