March Madness Disrupts the Markets?
A 54-page research study published in 2015 in Contemporary Accounting detailed the distraction of millions of investors from watching the securities markets and earnings news to watching college hoops*. Really? Are you ready to make moves while others are asleep at the switch?
As I read this paper, I realized they may have a point. Active traders who would normally make stock market trades based on breaking news might not be focused on their work if they were highly interested in one or more of the 68 teams that make up the Division 1 Men’s Basketball Tournament. But what about the rest of us?
Yes, I do submit a completed NCAA Tournament bracket to son #2 most years, and consequently, lose to a more informed opponent. Distracted from the markets? Not more than usual. I’m an indexer, not a trader. I suspect most of the clients I deal with are in the same boat or even in a boat headed in the opposite direction meaning not concerned about college athletics in general and men’s basketball specifically.
If market news, especially earnings news, fails to move the markets as it does at other times of the year, what’s an indexer like me to do? Nothing.
The securities markets go up and down based on many factors not related to the earnings of publicly traded companies: Congressional action or inaction on a variety of issues not related to taxes or money supply and Presidential speeches or tweets can move markets as a reaction to uncertainty. Foreign riots and disruption, weather-related disasters, and even celebrity drama can be linked to reactions in the stock and bond markets. For the most part, we in the long-term index investing arena just move on with patience.
I predict (can I really do this?) the markets will go up and down because of so many factors that most mortals are unable to develop a consistent response that provides a positive outcome over time. I believe it’s impossible to develop a strategy to take advantage of news that may not gather the attention of sports-minded active traders.
What’s the plan for us non-active sports-minded investors? Keep our long-term, diversified portfolio of index funds and turn on the TV to watch our teams. Go Arizona Wildcats.
*” March Market Madness: The Impact of Value-Irrelevant Events on the Market Pricing of Earnings News” March 9, 2015, Contemporary Accounting.