The Dow closed lower Thursday. Treasury yields climbed. The 30-stock index heads toward its fourth straight losing week. Financial journalists connected these dots with the confidence of a man who just learned what a bond is.
Treasury yields rose. Stocks fell. These two things happened near each other in time, so one must have caused the other. This is the same logic your cousin uses to explain why his fantasy football team lost after he wore the wrong jersey.
The Dow Jones Industrial Average contains 30 stocks. Thirty. Not 500. Not 2000. Thirty companies that a committee decided matter more than the other companies. It's a popularity contest from 1896 that CNBC treats like a national emergency every time it drops half a percent.
Retail traders will read this headline and panic-sell their positions Friday morning. They'll cite rising yields as the reason. They won't know what a yield is. They won't know why it matters. They'll just know that the headline said yields went up and that's bad, apparently, so they'd better get out before everyone else does.
The professionals already made their moves. They read the same bond market data weeks ago. They adjusted their positions when Treasury auctions actually happened, not when some journalist wrote a headline about it Thursday afternoon. The smart money moved while retail was still trying to figure out if 4.5% is higher than 4.3%.
Fourth consecutive losing week sounds dramatic until you zoom out and see the Dow is still up 8% year-to-date. But nobody writes headlines about slow, boring gains. They write about losses. Losses get clicks. Clicks get ads. Ads pay for the Bloomberg terminal subscription that provides the data for tomorrow's panic headline.
Friday's big stock stories will move the market exactly as much as Thursday's big stock stories did, which is to say not at all, but retail will keep reading them anyway because losing money is easier with a narrative.
Photo by Maxim Hopman on Unsplash
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