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Opinion
Barry Ritholtz

Stock Market Stories Lead Us Astray

Trying to explain why financial markets behave in a certain way often comes down to a narrative that makes sense, even if it's not accurate.
Futures markets earlier today pointed to declines in financial markets for reasons that were all about telling a story. Source: Bloomberg.
Futures markets earlier today pointed to declines in financial markets for reasons that were all about telling a story. Source: Bloomberg.

After a string of up days, most markets were showing red earlier today. We never know what the daily action of the markets will look like in advance. Whether you want to call it a random walk or the madness of crowds, those of us who toil in the capital markets can rely on no two days being the same.

However, one thing that occurs regardless of circumstances, data or specific events: The endless attempts made to explain the day-to-day in a narrative format. This futile gesture seems to occur regardless of the overall circumstances. Investors want an explanation that gives them comfort, even if their portfolio fails to do so.