All That Matters: Rambling and Gambling

Sifting Through the Noise

Ross: It’s been a very noisy couple weeks with the new year and new administration. We’ve been getting a lot of questions, the most existential being: how can I stay the course when things feel so noisy? When you have these larger questions, it’s important to keep in mind that it’s the events that come out of nowhere that pose the largest risk to your portfolios and goals

Mike: We have to remember the stock market has expectations. It’s always alert to potential threats like the national debt, the dollar, earnings, etc. But that same “noise” decreases the likelihood these events will have a dramatic impact on the market, because investors are pricing it into their decisions. Surprises, on the other hand, have a larger impact. A recent example is DeepSeek, a Chinese artificial intelligence company, who launched a new open-source AI model that rivals its U.S. competitors at a much cheaper cost. This spooked the market, with many Big Tech companies stating the need to reshape how they’re investing in AI technology. Nobody was expecting this – those surprises are what really matters when it comes to shocks to the market.

One of the noisiest things right now is tariff talk as the market comes to grips with President Trump’s tariff policies. Even though the market was expecting tariffs, it was still surprised at the scale of tariffs on China, Mexico, and Canada. Market adjustments and reactions will always be necessary, and managing uncertainty is the key in these situations. The Super Bowl is coming up, which provides a great analogy for long-term investing. In a football game, both teams come with a game plan. But as the game goes on, there are surprises. Is the other team rushing?  Is the quarterback passing? Each team must adjust along the way. That’s how you should view your investments. Develop a solid plan with your Baird Financial Advisor and they will help you adjust along the way. It’s important to keep in mind that not all news is worth adjusting to. You don’t want to make any decisions based on something that could be reversed in a week’s time;

Ross: Exactly. When things are overwhelming, return to your core principles. Control what you can control. In today’s environment, it’s especially important to limit your media intake. From 2019 to 2024, the number of hours U.S. adults spent on TikTok, Facebook, YouTube, and Instagram grew from 275 million to 425 million. As social media usage increases, it’s becoming increasingly difficult to separate news from noise. Our brains aren’t built to handle this level of information overload. When it comes to something as important as your investments, it’s good to pause and recognize this human limitation. Talking things over with your Baird Financial Advisor is a great first step when you feel like you might need to act.

Gambling’s Influence on Investing

Mike: Besides market noise, there is something else I’m worried about: online gambling seems to be changing the way investors view risk, and by effect their attitude towards the market. Whether it’s sports betting, meme coins or crypto, people see others winning big and they wonder – why am I not doing that? Long-term wealth building is about slow accumulation as the stock market and company earnings grow. Gambling is the opposite and can have a really negative effect on people’s brains.

Ross: I think the younger generations are especially at-risk. The mixing of gambling, investing, and social media has created an environment where it’s easy to see other people’s big gains. Remember that people aren’t posting their big losses. This creates a survivorship bias that makes people think the big wins are more common than they are. Incidentally, investing apps and other market players are taking cues from gambling companies and incorporating them into their offerings – zer0-day options or leveraged products for example. The gamblification of the markets is one of the bigger existential risks we’re facing.

Mike: It’s important to remember that investing is about playing your own game. As much as it’s interesting to look at what other people are doing, only you can determine what investments are right for you. If you have a diversified portfolio and are wondering if you’re missing out, just remember the football analogy: you wouldn’t leave your game to play in someone else’s. The world is full of uncertainty. Your Baird Financial Advisor is here to be the manager of that uncertainty through difficult moments and noisy headlines.

Ross: Focus on what you’re invested in – companies that are trying to grow their earnings over time. That’s the difference between gambling and investing. When you’re flooded with noise and uncertainty, you can lean on your Baird Financial Advisor and know that we’re here to help.