Pop Culture and the Stock Market: Why They Go Hand in Hand
How Does Society Influence the Markets?
Today, technology rules the world. You can communicate instantaneously with people on the other side of the globe, make purchases, and work a full-time job. The society we live in today is significantly different than the one that existed fifty, twenty, fifteen, even just ten years ago. Those who possess cultural power can influence the world with one tweet, one Instagram post, one outfit, just to name a few. This can be a celebrity, a big name in tech, or even just a typical, everyday civilian. As a population, we all work together with the resources we have at our disposal to write history. This, of course, includes the stock market.
Historical Evidence of Pop Culture's Impact
In 2009, a USA Today article explored the topic of pop culture influencing the stock market, referencing societal mood shifts with things such as newly released music, television, and films. It notes that in the past, society tends to popularize music or movies that have happy, energetic tones when the collective mood is positive, and sad, dramatic ones when it leans more negative. The article goes on to reference several popular songs, TV shows, and films that released when stocks hit both highs and lows, mentioning that it's no coincidence that the upbeat music peaked when the markets did, and the dark, sullen shows were big during bear markets.
While it may happen just by chance, some experts claim it's no coincidence at all. Although, it's not only art and mood that can affect the way the markets move. There are many instances in which pop culture has swayed the markets significantly.
For example, the Game Stop "short squeeze", which took place in early 2021, started on a subreddit. Members of r/wallstreetbets made a play against a couple of hedge funds who believed Game Stop was tanking and strategized accordingly. Redditors used this knowledge to their advantage, buying a significant amount of the stock, causing hedge funds to buy it back at a much higher price than originally purchased. So, a group of traders on a social media site caused a specific stock to rise incrementally in a short period of time; now, this event is a moment in market history not to be soon forgotten.
This isn't the only example of social media having a heavy impact on stock performance—Elon Musk, the richest man in the world and CEO of Tesla and SpaceX, has effectively influenced his followers with a simple tweet on numerous occasions. Whether it's about a cryptocurrency or his own company, his thoughts can create volatility with little effort on his part. This goes to show that with technology as advanced as it is today, it doesn't take much for those with a lot of societal influence, or even those with next to none (in reference to the GME short squeeze), to have an impact on a stock.
The Future of Investing
With how simple it can be for pop culture to alter the performance of the stock market, how will this look in the years to come? To answer this question, it's important to think back to the "why" and the "how" pop culture has such a noteworthy effect on the markets.
As previously mentioned, in only the past couple of decades, technology and the way we communicate with one another has evolved into something that controls nearly every aspect of life. Today, with things like social media and social networking, video calls, digital news outlets, email and texting, mobile apps, and the many other things the modern internet allows us to have make our day-to-day routines a lot different than they were during the internet's humble beginnings.
When technology changes, and the way we live adapts, it's only natural that the stock market will as well. Since stocks are made up of businesses and companies that create products for the general public and are run by human beings themselves, the process adjusts to the needs of society. Since people are spending a lot of time on devices (phones, laptops, etc.), reading the news, following the most popular celebrities, and watching trailers for the next summer blockbusters—they are going to be influenced by these things, whether consciously or subconsciously. Either way, the things we see on the internet can determine what we eat, what we wear, the things we do, and the topics we discuss with our friends. Each piece is a cog in the machine, working together with the ebbs and flows of humanity. The stock market is a part of that machine, answering to the desires of our society. As things are molded and modified to suit the next generation, the new gadgets and applications that may become popular, what happens in the world; whether trivial or significant, this will impact not only how stocks perform in the future, but potentially how they are traded, or even what is traded.
A good example of this is crypto. Since cryptocurrency become a prominent product in investor's portfolios over the past several years, trading has progressed to make room for the blockchain-based investment. With things like web3 technologies and decentralized platforms making their way into the limelight, a new door of potential has opened for the world of investment.
Technology is continuing advance every day. Just as many popular inventions or technological developments have made headway in the past—in turn impacting the markets—whatever innovations we are headed toward next are bound to be just as influential. There is no way to precisely predict how investing will be affected by pop culture in the future; the only certain thing that it will.
Why does it matter? It's crucial to pay attention your surroundings, to understand your environment, adjusting to keep yourself balanced and in tune with the world around you. For investors, this is especially true. While there's no right or wrong way to invest, no best or worst strategy, your choices made based on your goals, observations, and intuition. Whether intentional or not, your investment decisions are shaped by pop culture; knowing what's going on in the world and how you're impacted is essential to how you trade. The next time you see a viral tweet, watch a breaking news story, or even dine at a well-known restaurant, think: how is the affecting the stock market?
Disclosure: All investments involve risk, and not all risks are suitable for every investor. The value of securities may fluctuate and as a result, clients may lose more than their original investment. The past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss in a down market. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing.
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