Trust the Markets, Not the Headlines

For a little more than a month, the U.S. stock market has been on what looks like a historic tear. It recovered all its Iran war–linked losses, and kept on rising. Since the end of March, the S&P 500 is up about 16 percent—1.46 percent on Wednesday alone—and setting daily records. If you spend your time immersed in political news, you will be tempted to wonder, “How can that be?” Isn’t the world falling apart? There is a war in the Middle East and oil prices have spiked, with no obvious resolution or endgame in sight, even if a peace deal is announced. America has a president who pursues policies, such as unpredictable tariffs and tighter migration restrictions, that are opposed by most economists, this writer included. Corruption is rising and the rule of law seems to be declining. Taken all together, plenty of commentators have decided they just can’t make sense of the market’s climb. I have one very smart friend who, seeing all this bad news, decided to take the plunge and short the market—that is, bet that stocks will fall. I don’t share this view. In fact, I believe today’s high stock prices are warranted. Stock prices can always decline, perhaps even tomorrow, but we can be bullish overall. The key is that if we look at the global picture, the good news outweighs the bad, though it garners fewer headlines.