Have you ever gotten conflicting messages from the news? Do you ever find it hard to follow the market’s ups and downs? What’s the real story amidst all the headlines? My daughter had these questions the other day after inflation numbers came out for July. She noticed two headlines pop up next to each other in the news.
Headline 1 from The Wall Street Journal read:
“Inflation cooled slightly to 3.4% in July as gas prices declined.”
Compare that to Headline 2 from The New York Times:
“Consumer prices in the U.S. rose 3.4 percent from a year earlier, as high energy prices kept inflation elevated.”
Upon first glance, these headlines seem to conflict. One made her think the economy was getting better, while the other made her worried. After seeing both headlines–and admittedly not reading either article–, she didn’t know what to think about inflation. She asked me to weigh in for more clarity, wondering “which article has the right spin?”
I reminded her that context is important. In fact, neither of those headlines is wrong or even groundbreaking. Last month, inflation was 3.7%, driven by higher oil prices, so it did cool a bit since then. But the Fed’s target inflation is 2%, so it’s still elevated compared to where we’d like inflation to be.
As a financial advisor, I’m always happy to talk about inflation. But funnily enough, my takeaways from our conversation were less about inflation and more about news headlines. I was reminded that…
- Headlines are designed to grab your attention and trigger a reaction. It’s best to pause before jumping to conclusions.
- There’s usually not a single story when it comes to the numbers. In this case, the two articles cover different time spans.
- And, of course, it’s best practice to read the whole article rather than just the headline.
This is especially relevant for financial news, since dramatic phrasing can encourage impulsive decisions about investments, spending, or retirement. Our advisors can help you make sense of what’s happening with the economy and how it matters to you and your investments. Don’t hesitate to reach out for your advisor’s 2, or 2 ½, cents on inflation.
Financial Advisor