Monday through Friday, except for holidays, dozens of business reporters spend their days writing and talking about the stock market, trying to explain why the prices of some companies have gone up while others have gone down, and why the overall market may have risen or fallen.
They’re interviewing traders and analysts and hedge fund managers and mutual fund managers, trying to find general themes about what’s going on in the market. It’s coverage that only people with sizable stakes in the market really care about.
To be sure, there are some people not invested in the stock market who like to read these stories.
But business journalism has become overly focused on what the stock market does each day, and it’s not a story that resonates with many business owners and consumers who don’t have any holdings in publicly traded companies.
And if they do, it’s likely in a mutual fund or a retirement account that they don’t actively, or even regularly, trade.
Stock market coverage is the classic story that shows the current problem with business journalism. It’s content for only those with the financial means to invest and to spend on business news content.
Slightly more than half of Americans — 55% — own stocks, according to an April 2020 poll by Gallup, down from 67% in 2002. And according to the Federal Reserve, just 14% of American families have a direct investment in individual stocks, meaning most people invested in the market are doing so through a mutual fund or retirement account.
And stock ownership rises based on how much money someone makes — the top 10% on the income scale own stocks about 90% of the time.
During the 2020 pandemic, when many households lost income and wealth, it was upper-income consumers — and white households — who benefited the most by the 16.3% rise during the year of the S&P 500 Index SPX, -0.75%, a common barometer of stock market performance. Fifty-seven percent of white households own stocks, compared to 30% for Black households and 14% for Hispanic households.
Jack Murtha notes in the Columbia Journalism Review: “Most Americans don’t deal with stocks intimately enough to warrant a constant eye on financial news, just as most people don’t need to check their 401(k) every day.”
And only half of investors trust the media for information about markets, according to a survey for Natixis Investment Managers, while 41% said that the media is not trustworthy for markets information.
The overemphasis on stock market coverage leads many to believe that the market rising or falling is a scoreboard for the economy, mimicking sports news coverage. The higher the market rises, then the better off the economy.
Sean McElwee wrote in Talking Points Memo: “While the stock market has been humming along and corporate profits rebounded quickly, unemployment remains stubbornly high and wages low. At the same time, the recovery has been divided across racial lines, with the racial wealth gap in 2013 even larger than before the Great Recession. But news reports tend to downplay race gaps in unemployment, what Reniqua Allen calls the ‘permanent recession,’ focusing on the broad indicator. Newspapers and television anchors treat stock prices as though they are a symbol of broad prosperity, rather than a symbol that the rich are getting richer.”
Stock market stories and television segments about the markets are not good signals for what an investor should be following when deciding what to do with their money. Diego Garcia of Dartmouth College discovered that positive and negative words in market coverage in the Wall Street Journal and New York Times can affect the market.
But nobody uses those stories to buy and sell stocks. And James DePorre wrote in Real Money that stock market coverage assumes that all investors are betting on the market to rise.
“It can be very disconcerting when all the folks on television are talking about how fantastic the action has been while you are still struggling to find more stocks to buy,” he noted.
Stefan Theil, writing for the Harvard University Shorenstein Center on Media, Politics and Public Policy, called daily markets coverage, even though it is often the most prominent business and economics news coverage for television and radio, “utterly meaningless to anyone but a day trader,” primarily because it focuses on what has happened, and that past performance of an investment can’t help anyone predict its future performance.
He added: “If Wall Street’s smartest fund manages cannot, on average, outperform the market, the idea that journalists can do a better job predicting the future seems a little silly.”
In an ironic twist, CNBC’s Jim Cramer blamed the media’s negative coverage of the markets in 2019 for the lack of interest by consumers in investing. Cramer, who talks and writes about stocks to buy and sell on both CNBC and in The Street content, blamed stories about economic data.
“Bad news gets better ratings than good news,” Cramer said. “So I can’t really blame people for failing to recognize how much money’s being made in the stock market, especially in the best-performing individual stocks” on the market.
Yet those stories about economic data were appearing on CNBC and in many other media outlets, helping business owners and consumers make important decisions that had nothing to do with investing in the stock market, such as whether to spend money to expand manufacturing or to delay purchasing a new car or house.
Economic data in the media isn’t just for stock investors, despite the impression in the media that everything revolves around stocks.
Chris Roush is dean of the School of Communications at Quinnipiac University. This is an excerpt from his latest book, “The Future of Business Journalism” (Georgetown University Press).
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