The problem with Twitter
The Greek philosopher Aristotle is said to be the last person who knew everything there was to know. Aristotle lived before 24-hour news and Twitter. Today, we have too much news. This is a problem.
- It is hard to know what matters. Sifting "fake news" from real news is not easy to do.
- With so much noise, the media use more and more drama to get readers and viewers. The media report news with as much drama as they can. Subtlety does not sell.
- Investors do not use the mass of data. Investors want a simple story. The media set this "dominant narrative" story, but sensationalize. The story is also often wrong.
- Frequent data has a higher profile in the story. Investors pay more attention to frequent data releases, caring little if it is actually useful. Sentiment data is a good example of this.
- Markets treat new data as more important than correct data. Investors react to early data releases, but ignore revisions. Market prices use the worst-quality economic data there is.
In the long term, economics should drive markets. The mass of data adds short-term volatility – particularly today. Follow me @PDonovan_Econ and help defeat the effect of soundbite economics.