Have you protected your portfolio from market misinformation?

Last May an AI-generated picture, which claimed to show an explosion near the Pentagon, raced through U.S. stock markets, causing billions of dollars in losses before it was revealed as a fake.¹

Welcome to the world of market misinformation. The digital evolution of the information landscape has spurred a significant rise in misinformation (defined as inaccurate information) and disinformation (defined as false information intended to deceive). Indeed, the World Economic Forum in January identified misinformation and disinformation as the most severe short-term risk the world faces.²

Social media and messaging apps spread false news at remarkable speed. So-called deep fakes (manipulated video, audio and text) often look real. Conspiracy theories somehow seem plausible. The pressures of a 24/7 news cycle make it more difficult for reporters to check their facts before publication. Finally, the advent of AI technology will only exacerbate the explosion of misinformation. It already has.

What does this mean for your investments? In ways that may be hard to understand, acting on misinformation can impact the value of your portfolio. Investors who repeatedly rely on unverified information may adopt speculative trading behaviors, undermining the rigorous research and analysis that should inform investment decisions. 

Most people don’t have the necessary time, resources or expertise to fully insulate their investments from misinformation. Professional management can help ensure that you follow the data, not the headlines. That will be ever more important as the threat of misinformation continues to grow.

False narratives, market losses

Misinformation touches a wide range of investors. According to a 2023 survey by insurer Nationwide, 34% of non-retired investors aged 18–54 acted upon financial information seen on the Internet or social media that turned out to be misleading or factually incorrect.³

Journalists acknowledge the growing challenge of identifying false information. A 2022 Pew Research report finds that among “reporting journalists,” 26% say they unknowingly reported on a story that was later found to contain false information.⁴

Among the cases of market-moving misinformation:

• In 2022, a tweet that purported to be from Eli Lilly (it was not) announced that  the pharmaceutical giant was distributing free insulin (it was not). The stock reportedly lost 4%, roughly $15 billion, of its market value before the company could correct the record.⁵
• When an inaccurate report in 2017 claimed that the founder of blockchain company Ethereum had died in a car crash, the company’s market value reportedly dropped by $4 billion.⁶

Other incidents include basic frauds. False statements by once high-flying truck company Nikola Corp led to a four-year prison sentence for the company CEO in 2023.⁷ Three years earlier, Chinese coffee chain Luckin made a $180 million payment to the SEC to settle accounting fraud charges.⁸

How to mitigate the monetary threat of misinformation 

You may be well-informed, and still tripped up by market misinformation. That’s why it is critical to receive investment guidance from financial advisors and money managers whom you know to be credible. 

We advise working with a money manager who has an experienced team – and ethical – investment professionals who can provide information specifically curated for you. 

You’ll want to be sure you choose a professional money manager   who meets frequently with an extensive network of C-suite executives, weighs first-hand information and constantly monitors markets. For example, our Chief Investment Office, consists of specialists that meet with a vast network of industry leaders, constantly monitor markets, and make informed investment decisions driven by fundamentals and macro dynamics at play to help investors stay on track to meet their wealth goals. They conduct more than 300 company meetings a year. (84% of the global CIO Team holds either the CFA designation or a Master’s, MBA or PhD degree.)

With a sharp focus on risk management, a professional money manager will aim to align each portfolio with its objectives. A portfolio analytics team can stress test portfolios against multiple scenarios to help secure  portfolios from the risks associated with negative events. 

Always, a manager should make informed decisions driven by investment fundamentals and macro dynamics in play – not by the latest social media post or sensational headline. 

We can help

At J.P. Morgan Private Bank, we remain committed to providing the necessary analytical tools, resources, and insights to help clients steer a clear course through the miasma of misinformation. Learn how our Chief Investment Office can help you stay on track to meet your wealth goals.