Can ‘Fake News’ Impact The Stock Market?

Did you hear what the CEO of XYZ Corp said about those widgets in Mexico? For the markets, what is “fake news”? It’s rumors, and misinformation sometimes used to move the price of a security. It’s not new. Some tech firms are working on detection mechanisms that will score a news articles reliability to help those who rely on the news to make investment decisions.  (Photo by Spencer Platt/Getty Images)

It’s November, 2016. A post from some unknown source goes viral on Facebook. It says Donald Trump won the popular vote by three million. To the trained eye, it’s completely fake. To most people who aren’t seasoned journalists, it’s a true story. To those in a particular partisan bubble, it’s truer than a heartbeat.

“Fake news” suddenly became a new thing, though the topic has been tossed around at least since the advent of The Onion and the popularity of Comedy Central smash “fake news” shows, The Daily Show and Colbert Report. The meme, if you can call it that, got jump started with Hillary Clinton’s camp claim that fake news by the Russians helped her challenger Donald Trump to the White House. Trump supporters in the media, namely Breitbart, turned that story on its head and made the mainstream credible press, the mainstreamed non-credible press. No one trusts anyone now. Unverifiable stories look true. They put out bad news, and many are led to believe them as fact, especially when they appear in larger media outlets.

From a country standpoint, and looked at through the lens of Wall Street, no country has been both the victim and source of “fake news” than Russia. The barrage of news about Russian hacking and Russia retaliatory sanctions of shutting down the Anglo-American School of Moscow (an unverifiable, unsourced, and totally incorrect story published by CNN and Business Insider) help to give Russia a bad name.

“I am trying to ignore a lot of the hype,” says Michael Reynal, a fund manager at Sophus Capital in Des Moines. Reynal invests in Russia for clients, many of whom live in the American Midwest. “At the stock level this has been mostly irrelevant. Clients have asked about our overweighting Russia, but a conversation of earnings fundamentals ends that discussion pretty quickly.”

Gerardo Zamorano, director of investing at Brandes in San Diego says Russia was an even harder sell last year thanks to the news flow about hacking and the general fog of war stories about Russian planes bombing Syrian civilians and hospitals. “There was a constant barrage of bad news and yes it made it very difficult to talk about Russia to our investors,” he says. “It’s getting better.”

Misinformation and the Stock Market

Everyday there are bloggers and freelancers writing for business news sites. Not all of them are journalists. Their articles can go viral and make it up the food chain to the major publishers, manipulating the direction of the market. Attempts at moving asset prices through the written word are not new. But since the election, everyone is paying attention to bombastic, misleading headlines.

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