Stock Market Insights: Fake Market Drama

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“I am 35, may I know how young are you? I hope we can have a nice chat.” The private message came from a Twitter account with a profile picture showing a beautiful young woman. I immediately knew it was a fake account and just ignored it. But unfortunately, it turns out the stock market is a little easier to fool.

Last Monday, May 22, 2023, a fake picture claiming to show an explosion near the Pentagon in Washington, D.C., was posted and widely shared on social media, causing a quick drop in the stock market. The Pentagon confirmed there was no such incident, and the stock market recovered.

The picture was created by artificial intelligence and falsely claimed it is from Bloomberg News. A spokesperson for Bloomberg News released a statement saying the picture wasn’t theirs.

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What concerns me is that a fake news story made the stock market drop (thankfully, only briefly.) Computer-controlled investment portfolios immediately reacted to the news causing a flash drop.

Not to bore you, but computers (robo-advisors and such) use Efficient Market Hypothesis, which makes investment decisions using all available information. My question is, who determines what the computers consider fake?

The stock market took a dip in the minutes after the picture began circulating. According to CNN Business, the Dow Jones Index fell about 80 points between 10:06 am and 10:10 am and then fully recovered by 10:13 am. In the same way, the S&P 500 Index went from positive 0.02% at 10:06 am to negative 0.15% at 10:09 am and then fully recovered by 10:11 am.

The market disruption lasted only 5-7 minutes, but during those minutes, the market value dropped an estimated 9 billion dollars before it recovered.

“Large explosion near the Pentagon complex in Washington DC. – initial report” is what the fake article read alongside a picture of black smoke rising by a large building. The effects show us how artificial intelligence has a great influence with real-world consequences and not just on the internet.

I personally make every trade on the accounts in my care with the use of heavy research and analysis. It would be easy to turn everything over to a computer, but this week’s events reinforce my thoughts that some things need a steady human hand.

I suspect it will become more and more difficult to determine truth from propaganda, but common sense and discernment are good guides. So, investors will need to be ever more watchful concerning events that could affect their investments.

When I didn’t respond to a private message from the supposedly beautiful young woman, the account said, “Hi, are you too shy to talk to me?” I just smiled and took my real beautiful (totally out of my league) wife out to dinner.

Have a blessed week!

www.FerventWM.com

Dr. Richard Baker, AIF®, is the founder and executive wealth advisor at Fervent Wealth Management.

Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results. All indices are unmanaged & can’t be invested in directly.

The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.

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