Markets and Economy Why market headlines may miss the bigger picture

I shadowed an Associated Press photographer once during a college football game. It was a fascinating experience, not necessarily because of what I learned about photography, but because I learned something about perspective, which has stayed with me as a global market strategist watching the stock markets. Here’s why. At one point, a player went down with an injury. As trainers rushed onto the field, a cluster of photographers sprinted toward the scene to get a shot of the injured player lying in pain.

The photographer I was shadowing didn't move. He just looked at the others with disdain. He explained that they were chasing a photograph that only mattered if the injury turned out to be catastrophic and involved a prominent player. If that happened, the picture would be splashed across newspapers everywhere. But most injuries don't change the outcomes of games or warrant the front page of newspapers. Most are simply interruptions in a much bigger story. "I'd rather be in position for the next play," he said. That’s the lesson that has stayed with me.

I've thought about it often over the past several months with all the dramatic headlines about the markets.

Look beyond dramatic headlines

There has been no shortage of reasons in the global economy and financial markets to focus on "injuries." War in the Middle East. Higher oil prices.¹ Concerns about headline inflation.² A Federal Reserve (Fed) that has been less communicative than many investors would like. A consolidation in technology stocks after a remarkable advance.³ Intervention in the Japanese yen market.⁴

Each of these developments has generated dramatic headlines and confident predictions of trouble ahead. And to be fair, if I focused on those risks, made a sufficiently negative call, and happened to be right, perhaps I'd get my picture in the paper too. But I'd rather focus on the bigger game.

Insight on oil, tech, and Japan headlines

Consider oil prices. The spike that had many investors worried peaked back in early April.⁵ Inflation? Market-based inflation expectations have been moving lower rather than higher.⁶ Concerns about a more hawkish Fed? Markets have already digested the equivalent of roughly two additional rate hikes with surprisingly little stress showing up in credit markets⁷ or even in the S&P 500 Index Equal Weight Index.⁸ In fact, given where inflation expectations have fallen, I'd still take the under on two additional hikes.

What about technology stocks? Yes, there has been some consolidation,⁹ but it's occurring against a backdrop of strong earnings growth and extraordinary demand for AI-related services.¹⁰ The major hyperscalers continue to report backlogs that suggest demand remains ahead of available capacity.

And then there's Japan. Much attention has been paid to the yen and the possibility of additional Bank of Japan rate hikes. Yet markets appear to be absorbing those expectations without significant disruption. The Nikkei 225 Index, after all, has been strong year to date.¹¹

Meanwhile, the broader “game” continues to look quite favorable. This week's economic data offered another reminder. Jobless claims remained low by historical standards.¹² Productivity growth surprised to the upside.¹³ While the payroll report came in weaker than expected, it likely lowers the probability of rate hikes.¹⁴ None of this suggests an economy on the verge of rolling over in my view.

Too often, investors are drawn toward the dramatic headline, the temporary disruption, or the latest source of anxiety. Like those photographers running toward the injured player, they can risk losing sight of the field itself. The headlines may be compelling, but the larger story appears to remain intact. Economic growth continued. Corporate earnings have held up. Inflation pressures have been easing more than accelerating. Financial markets have been adjusting to policy changes largely without obvious signs of stress. That’s why I'm not rushing toward the “injury,” the dramatic headlines regarding the markets, and focusing on the bigger picture instead.