Noise Canceling Stock Charts
The stock market isn’t about everything
Last year, when President Trump announced tariffs on the whole world, the stock market had a sharp and significant pullback. Many articles and think pieces were written about how this was the start of something very bad. But if you fast forward several months, the stock market more than recovered and ended the year with a better-than-average return, up 18%.
If you merely looked at the prices on January 1, 2025, and then skipped ahead to December 31, 2025, it would have looked like a very easy year. Of course, living through it was anything but easy because it entailed living through all of the noise. And some of that noise is louder than ever.
Another example is 2020. From the start of the year to the end of the year, the market was similarly up 18%. Everything that happened in the middle was extremely significant, but it didn’t matter for the stock market as much as people expected it to matter.
But what if we created “noise canceling stock charts”: a simple, straight line from the starting point to the ending point. This way you can see what happened in total, but reduce the noise in the middle that is both anxiety-inducing and drives people to make poor investment decisions.
2025 was a volatile year for the stock market, but an above-average one at +18%.
2020 was an even more volatile year, but nearly twice as good as the average year in the stock market.
It can be helpful to remember that the stock market is not a referendum on the health of the world. It’s much simpler than that. It’s about the total value of the public companies in the country. And the biggest determinant of the value of those companies are their profits. How people feel about those prospects is far more volatile than the actual variability of the revenues and profits.
As investors, it’s important for us to tune out the noise, however loud and significant it is, because ultimately, the stock market is not answering that many questions at all. It’s measuring the long term profit growth of a specific group of companies. That’s it.
Best regards,
Evan McGoff
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