There are two simple truths that this article is built on. First, negative news generates more clicks, views and reads than positive news, and second, that financial markets will have a wide range of negative news to deal with in 2016.
A China slowdown, Russian geopolitical manoeuvring, the Syrian crisis, Europe grappling with a huge influx of refugees, the US presidential election as well as our own federal election will all be identified as "reasons" that the market went up / down / sideways at different times in 2016.
But in the face of these supposedly market-moving headlines, you need to keep a clear focus on the businesses that you own shares in, and whether or not they will actually be affected over the long term.
So with that in mind, here are three sanity checks for some popular stocks in 2016 when the headlines threaten to overwhelm simple investing logic and reason.
Headline: The Australian dollar is plummeting
Every Australian knows that the Australian dollar has fallen from its commodity boom driven highs to levels far closer to its long-term average. Lazy analysis usually tips this fall in the dollar as a strong headwind for outbound tourism.
However, to put this in perspective, it is still predicted that Australians will take over 11 million overseas trips next year. That means that standout businesses exposed to our liking for international travel like Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) are not at risk of collapsing in 2016, simply because the Aussie dollar has depreciated.
Headline: World economic growth is slowing
Another favourite headline of sub-editors is that world economic growth is slowing. Which is going to be true at any point in time. Why? Because the term "world economy" is inherently misleading – at any given time, there will be nations who are outperforming, slowing and many who are simply marking time.
There will always be markets that outperform others, and more importantly for value investors, there will always be listed businesses within those markets that have sound plans in place to grow. Identifying these individual stocks is difficult, but proven asset managers and international stock pickers with decades of experience can be found on the ASX. Platinum Asset Management Limited (ASX: PTM) and Magellan Financial Group Ltd (ASX: MFG) are two stellar examples who have delivered above market returns for many years by focussing on international markets and companies.
And I guarantee that in every one of those years there were plenty of headlines about global growth slowing.
Headline: Fintech set to disrupt Australian banks
With an innovation focussed Prime Minister, digital disruption has entered the mainstream conversation. Two of the most reliable indicators for a business model that is ripe for disruption are high profits and limited competition: witness the effects of Uber on taxi monopolies across the world.
The Australian banking sector is a true oligopoly, generating consistently high profits, with four multi-billion dollar banks that almost every investor holds directly or indirectly (through their superannuation). Financial technology (Fintech) companies will rightly target these high profits to offer faster, more user friendly and more price competitive services than the Big 4 banks are able to.
But the entrenched size and expertise of the banks means that these nimble competitors will be learned from or acquired as they gain traction, and integrated into the banking system. So don't let headlines about Fintech companies spook you into selling your bank shares – the health of the housing market and the strength of the economy (in effect, mortgage holders) are far more influential to bank share prices.
