The Opportunities Go To Those Who Can See Past The Negative Headlines

The Opportunities Go to Those Who Can See Past the Negative Headlines

“Follow the trend lines, not the headlines.”

The quote, attributed to former President Bill Clinton, is one of my favorite pieces of advice. Clinton was referring to long-term data that show that conditions have actually been improving for the human race despite popular opinion to the contrary. When applied to investing, it cautions against missing opportunities because you’re too busy reacting to negative news.

To be sure, there’s more than enough negative news right now: international trade tensions, volatility in Syria, Brexit, an impeachment inquiry and much more. If we based everything on what the talking heads tell us, we may never have the confidence to invest so much as a dime.

Instead, it is important focus on fundamentals such as moving averages and standard deviation. We follow leading indicators such as the purchasing manager’s index (PMI) and consumer confidence index. These factors are many times more effective than the headline news at shining a light on the right path.

Did You Catch These Opportunities?

Here’s an example. A lot of the news coming out of China right now is negative. Its economy is slowing. Tariffs are hurting trade. The Hong Kong protests are causing geopolitical pressure. It’s enough to make an investor run and hide.

Which would be a mistake. Take a look at the chart below. The First Trust Chindia ETF, which invests in companies in both China and India, is up more than 20 percent for the 12-month period through October 25. That’s enough to beat the S&P 500 over the same period.    

(Click on image to enlarge)

Follow the trend lines not the headlines

Or consider British stocks. You might think that Brexit uncertainty has made investing in the U.K. a nightmare. And yet the opposite seems to be the case—the iShares MSCI United Kingdom ETF is up close to 10 percent for the 12-month period.

(Click on image to enlarge)

UK ETF Up for the 12-Month Period Despite Brexit Headwinds

Another good example are the recent copper strikes in Chile. In this case, bad news is actually good news. With production halted for days at Chuquicamata, the world’s largest open-pit copper mine by volume, global supply could be disrupted, which may push up prices. Due in part to the strikes, copper is on track for its second straight month of positive gains and its best month since February.

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Disclaimer: 

The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory ...

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