📜 The stories we tell

Hey hey, happy Monday!

First, thank you all for the feedback/interesting stories from last week’s piece on the mental torture of investing in Apple. Since then, I’ve heard of a few cases of Apple IPO investors who haven’t sold yet, and are adamant on never selling.

If that’s you, I still have questions. Why buy if you’re never going to sell? And if you are going to sell and enjoy those millions, what are you waiting for?

I want to pull on this thread more, so email me at callie@optimisticallie.com if you have thoughts/experiences like this with family, friends or clients.

Also…how about this for some social proof? The Washington Post wrote about the great wait this past week, almost four months after you read about it here. Making headlines, people!

Today, some words that a lot of us need to hear after a loud week of narratives. Including me.

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What’s your excuse now?

Tariffs, inflation, the job market, or Nvidia aren’t going to define markets in 2025.

Narratives will.

By the way, this has always been true. Storytelling has been a powerful tool throughout history—from cave paintings and traveling bards to newspapers, radio, and (ugh) social media.

Over the past few years, though, narratives have superseded reality, especially in the age of engagement bait and loud noises.

You know what I mean. Those arguments with family members over conspiracy theories they read online. That five-hour rabbit hole you fell into on TikTok just to feel something. Narratives.

It’s never been easier to build your own algo-curated world.

And unsurprisingly, when these worlds collide, they can create unachievable expectations. Think parasocial relationships, Finstagrams, and other false narratives that leave you at risk of major letdown.

Sound familiar? It should, because your portfolio has now entered the chat.

Over the past few months, the narratives have been doing extra work in the stock market. We hyped up the idea of a pro-growth administration that could shift the trade scales back to America, cut tax rates, promote AI innovation, and strip away banking regulations. Long-term interest rates hit a 17-year high, the U.S. dollar surged to a two-year high, and stocks soared before Inauguration Day.

Then, Trumpcoin happened. Memecoins are the pinnacle of narratives over reality (or lack thereof), and this particular memecoin came from the freaking president of the United States.

It’s now apparent that tariffs may not be implemented for a while. Maybe February, maybe April, maybe even further out than that. The U.S. dollar dropped the most in 14 months on January 21, just on pure tariff speculation.

This past week got me thinking about the tariff rollercoaster of 2018.

That was the year of widespread, steep tariff threats on China—and later, Mexico and Canada. While some of these threats materialized, many were just stories, and they still caused major turbulence for corporate America and the stock market.

You can see this in the correlation between market moves and Bloomberg’s count of news stories mentioning tariffs and the most volatile days from July 2018 until the end of 2019.

Remember, this all happened before TikTok, threadbois and the COVID-era rift that tore through the internet. The megaphone is ten times louder today, y’all.

I’m not here to extrapolate one week’s events into the next four years. I am definitely not here to talk politics.

But seriously—have our brains even started to comprehend what level we've reached?

Wall Street has always ticked on stories. That’s why the S&P 500 has climbed in just 53% of days since 1950. Stocks are essentially a headline-fueled coin flip on a day-to-day basis.

If a negative headline pops up, your risk-averse brain reacts by selling first and asking questions later. Multiply that reaction across millions of investors, and you have enough momentum to move major market indices.

But something’s changed here.

Stories aren’t just trading fodder anymore. They’re carving a path for your portfolio—a path that can force you into costly mistakes and rob you of your sanity.

Narratives exist about everything these days. Certainly about AI — just look at tech stocks’ perverse reaction to the Deepseek news today.

Even those crucial jobs and inflation reports we rely on as economic gauges. Objectively good news causes stock prices to drop because the narrative doesn’t match our lofty expectations.

This upside-down dynamic is nothing new, but it’s been extra noticeable lately as markets digest another story: the inflation crisis, part 2.

Take the last jobs report. Hiring accelerated and unemployment dropped, yet stock prices plunged. While the data was great news, the prevailing narrative of scorching inflation led people to dump stocks at the fastest rate on a jobs day since August (before that, October 2022).

Now, there isn’t much data to support materially higher inflation here. Consumer price inflation is growing at a 2.9% clip. Core PCE is up just 2.8% year over year. Producer prices have grown around 2% annually for over a year. Squint a little, and you could make a case for inflation stalling right below 3%. Hardly a crisis if you believe the numbers.

But inflation’s wounds are still fresh. People see soaring egg prices and rising mortgage rates, and they wince at the memory of 2022. Narratives are awfully compelling for a vulnerable society.

Even more so for the Federal Reserve – those tight necktie interest rate warriors up in DC. In the December meeting, 79% of Fed members noted that they see “upside risk” to inflation – or a higher chance that inflation rises then falls.

In September, just 16% of members projected higher inflation – the biggest about-face in Fed member expectations since 2021 (and before that, 2008).

Something changed, but it wasn’t the data. No matter how much the Fed brags about being “data dependent”.

So how do you invest when narratives are all that seem to matter?

You remind yourself that they don’t. At least for your own money.

Seriously. No matter how loud the megaphones are, the case for investing in U.S. markets is about as strong as it’s been if you can ignore the noise.

Profit margins for S&P 500 companies are at record highs. Americans are innovating like the risk-taking capitalists we’ve always been. And our economy has been remarkably stable over the past few decades.

Like, one month of recession in the past 15 years stable.

This matters when you consider that seven of the past 11 market crashes have coincided with economic downturns. 

In a way, the megaphones may be louder now because there’s less to worry about in the economy and corporate America. My pal Morgan Housel has a great podcast episode on this, by the way.

That’s not to say everything is perfect, by the way. There are plenty of injustices and political issues out there we can’t ignore. And you can pry TikTok out of Gen Z’s cold dead hands.

You have every right to be frustrated by these narratives. But you don’t have to chase them.

In fact, you can’t afford to chase the shiny object of the day. You’re building something bigger than stories.

By the way, I’ll be writing that down on a Post-It note and sticking it on my bathroom mirror.

Because you’re not the only one who lets the narratives win from time to time.

Thanks for reading!

Callie

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