Negative Thinking: How It Influences The Masses

Negative Thinking

Negative Thinking and how it affects your investments

Updated Feb 2023

When the trend is positive (UP) train yourself to view strong pullbacks, corrections and other adverse developments through a bullish lens. Anyone can panic in the face of trouble, but only astute individuals can stand still and direct their energy to spotting opportunities. Don’t do what the masses are trained to do, for, after all these years of panic, they have nothing to show for it. Market Update Sept 15, 2019

And that is due to the brain’s “negativity bias”: Your brain is built with a greater sensitivity to unpleasant news. The bias is so automatic that it can be detected at the earliest stage of the brain’s information processing. Take, for example, the studies done by John Cacioppo, PhD, then at Ohio State University, now at the University of Chicago.

The human mindset thrives on misery; it’s hardwired towards negativity.

He showed people pictures known to arouse positive feelings (say, a Ferrari or a pizza), those certain to stir up negative feelings (a mutilated face or dead cat) and those known to produce neutral feelings (a plate, a hairdryer). Meanwhile, he recorded electrical activity in the brain’s cerebral cortex, reflecting the magnitude of information processing. The brain, Cacioppo demonstrated, reacts more strongly to stimuli it deems negative. There is a greater surge in electrical activity. Thus, our attitudes are more heavily influenced by downbeat news than good news.

Media Purposely pushes The Negative Thinking Concept.

The media outlets know this very well, which is why 3X to 5X more coverage is given to any story with a negative connotation.  This also proves why the masses always lose when it comes to the market; they are too busy focussing on rubbish and miss the opportunity that’s right in front of them.

For example, you might be having a great day at work when a co-worker makes an offhand comment that you find irritating. You then find yourself stewing over his words for the rest of the workday. When you get home from work, and someone asks you how your day was, you reply that it was terrible—even though it was overall quite good despite that one negative incident.

This bias toward the negative leads you to pay much more attention to the bad things that happen, making them seem much more important than they really are. We pay more attention to negative events than positive ones.  We even tend to make decisions based on negative information more than positive data. It is the “bad things” that grab our attention, stick to our memories, and, in many cases, influence the decisions that we make.

Never Wear Your Emotions On Your Sleeve

Over the years, we have repeatedly advocated against wearing your emotions on your sleeves. A polarised person is the easiest person on the planet to manipulate; it is even easier than stealing candy from a baby.  This is why the crowd never wins. You have to get rid of this herd mentality; just reading about it is not going to fix the problem. A huge number of new subscribers gave in to the herd mentality. As we have stated over and over again, individuals beg for stocks to drop in price, but when they do, instead of buying them, they run away, and so continues this vicious cycle.

While such actions might have some value if one was living in the jungle, it is a perilous reaction when it comes to the markets. The reason it’s dangerous is that the big players understand the effects of fear and negativity very well, so they go out of their way to blow an adverse event out of proportion. How often have you seen back-to-back coverage over a positive event; not often, and now you know why.

Simple Solution To Deal With Negative Thinking

The only way to find a solution is to understand the problem; the masses never look for a real solution. They want a temporary patch, and running from a troubling situation, even though the problematic event might not be real is the solution of choice as it’s easy. Well, as they say, easy come, easy go, and that is why such easy solutions are useless, for they provide the illusion of safety while delivering devastating results to one’s finances.

One would have thought by now that an investor that got knocked out once would pull up a long-term chart and ask themselves a few simple questions. For example, has panicking ever paid off?  Why, then, do the masses insist on following a path guaranteed to lead to a negative outcome?  The answer is very simple; misery loves company, and stupidity simply demands it.

The single thing any individual could do to improve their investment skills is to start with what it’s not.

  • It’s not by learning Technical or pattern analysis or how to read a company stock report.
  • It’s not by becoming an expert by studying the fundamentals of a company or a host of other BS info. That the experts falsely promote

Mass Mindset: Understand what it is 

Understand the mass mindset. The mass mindset is hardwired to panic, and once you understand this (i mean really understand this), you can easily reprogram your mind.  This is what mass psychology is all about understanding the mass mindset. However, remember that you are part of the mass mindset, so understand who you are and who you were so that you can now formulate a plan for creating the “New You”. Technical analysis is instrumental, but only once you master the basics of mass psychology.

New Stock Market developments

Copper continues to put in a bullish pattern, and the pattern is dangerously close to generating a bullish signal. A bullish signal will/should have a positive impact on the overall market. Consider also that the current consolidation in copper has been relatively mild, so the odds of a strong move are pretty significant.

The Tactical Investor alternative Dow Theory states that if the utility trades to new highs, it almost always indicates that the Dow industrials will pursue a similar route, and that’s what’s taking place right now.

For the record, the Dow Utilities soared to new highs in September, and so far, the Dow is following in the footsteps of the utilities. The transport sector and copper should outperform the markets. While many experts were predicting a crash, we at most were looking for a pullback ranging from mild to wild. However, the long-term trend is still bullish, and it is dangerous to short a market in such an atmosphere.

Investors flocking to bonds

Vast amounts of money have left the market, demonstrating that the crowd is bailing out at precisely the wrong time. History has never been kind to the masses, and we don’t think the pattern will change shortly.

“People are talking about bonds and bond yields like they were talking about Beyond Meat a month ago. You’re talking about bonds trading like high-flying stocks,” he said.

Beyond Meat went public in May at $25 before peaking at $234.90 on July 26. On Monday, it was up 2.9% at $169.11 per share.

“They’re holding their nose and buying,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors. He said some investors are buying out of fear, and they are worried that Fed will not be able to rescue the economy from falling into a recession. “The effectiveness of Fed stimulus has been diluted. There may be a growing argument that we’re driving around without a spare tire. That’s a new fear.” CNBC

The masses beg for better prices, but when an opportunity presents itself, they do precisely the same thing as before; panic and flee for the hills and ignore the opportunity.

The Stock Market is mimicking the pattern of 2009; if this pattern completes, it will/should lead to an explosive upward move.

References: Negative Effects on Stock Market Returns

Here are some articles that discuss adverse events and their effects on stock market returns:

  1. “The Effects of Negative Information on Stock Market Returns” by Jeff Madura (Journal of Financial Research) – This article explores how negative information, such as news of scandals or disasters, can impact stock market returns.
  2. “How Negative News Affects the Stock Market” by Ben Hernandez (Investopedia) – This article examines how negative news can affect investor behavior and stock market returns, and provides examples of negative news events that impacted the stock market.
  3. “The Economic Effects of Terrorism: Evidence from Stock Market Returns and Trading Volumes” by Stefan Mittnik, et al. (Journal of Policy Modeling) – This article discusses how terrorist attacks can impact stock market returns and trading volumes.
  4. “The Impact of Natural Disasters on the Stock Market” by Lou Carlozo (U.S. News & World Report) – This article looks at how natural disasters, such as hurricanes and earthquakes, can affect stock market returns and investor sentiment.
  5. “The Impact of Political Events on the Stock Market” by Will Kenton (Investopedia) – This article explores how political events, such as elections and policy changes, can impact stock market returns and provides examples of historical events that affected the stock market.

Academic Articles:

These are all academic articles and may require access to academic databases for full access.

  1. “The impact of economic and political uncertainty on stock market returns in Brazil: An empirical analysis” by C.C. Sousa, et al. –
  2. “The impact of natural disasters on stock market returns: Evidence from the US” by J. Zhang and Y. Zhao –
  3. “The impact of terrorism on stock market returns and volatility: Evidence from the OECD countries” by S. Smaoui, et al. –
  4. “The impact of political instability on stock market returns and volatility: Evidence from the OECD countries” by M. Djouadi and A. Boutahar –


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