“It was the scariest day on Wall Street in years.” That’s how CNN, one of the four news outlets we analyzed, opened its article on Monday’s decline in the Dow Jones. Notice how CNN’s description creates a powerful impression while providing no data about what happened that day. That’s what spin can do.
By “spin,” we’re referring to language that’s dramatic, sensational, vague or subjective. While entertaining (if you like your news sensationalized, that is), spin can taint or bias the way we understand events and take in information. More importantly, it can affect the way we make decisions. And what drives the financial market? That’s right: investors’ decisions.
For instance, say you’re an investor. How would the following statements affect your decisions? (The spin is noted in red.)
Stocks sank throughout the day, then went off a cliff in the final hour of trading. (CNN)
Monday’s whiplash inducing trading session has finally ended — and probably not a moment too soon for frazzled investors. Here’s a round-up of Monday’s carnage. (Financial Times)In the least, you might be worried about your investments, and you might consider selling. But notice again how these statements contain no precise, measurable data about the decline, yet they convey a big problem. This “lots of drama, little or no data” combination is a handicap for critical thinking and problem solving. The media’s spin could incite more fear, potentially making the decline greater.
We spoke with an institutional portfolio manager at a Los Angeles-based investment fund who said he thought the media has been embellishing the data in order to attract more readers and viewers. “The facts are the market gave back 10 percent of its gain over last two years,” he said of the recent declines. “That’s kind of boring, so the media will stoke a reaction.”
He also said the sensationalism tends to obscure the complexities of the market, and the fact that the economy is growing. “The stock market is the function of so many variables,” he said. “In general, it’s a function of corporate earnings, and whether they’re growing or shrinking. Right now they’re in a growth phase. The underlying numbers are good. The newspapers are ignoring how good the economy is.”
“The media does have a vested interest to spin the stock market in a highly negative way,” he added.
Here’s a word cloud of the most frequent and most dramatic language included in the outlets we analyzed. As you eye it, notice how the words affect your thoughts and emotions.
Even in statements that do provide specifics, spin can have similar effects. Here’s an example.
The Dow Jones industrial average plunged 1,175 points Monday in an exceptionallyvolatile day for financial markets across the globe, stirring concerns about the durability of the long-running bull market. (The Washington Post)The Post’s lead statement provides actual data about the Dow Jones, but then adds spin. Compare that to the lead in our Raw Data:
On Monday, the Dow Jones Industrial Average declined 4.6 percent to 24,345.75 points. The 1,175-point decrease was the largest one-day point decline in the index’s history, and the largest in percentage terms since August 2011.Ours may not be as emotionally gripping as the Post’s, but it is more informative. And that’s what data-based reporting can do. How would financial markets fare if the media reported just the facts?
Jens Erik Gould
Jens is a political, business and entertainment writer and editor who has reported from a dozen countries for media outlets including The New York Times, National Public Radio and Bloomberg News