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The round number obsession — 7IM Short Thoughts

2 min watch
Chris Justham, Head of London and South East Intermediary14 Mar 2024

We are obsessed with round numbers, even when it comes to looking at financial markets. When the S&P 500 recently hit 5,000, it felt significant.

But was it really? In this Short Thoughts video, Chris reflects on the seductive nature of round numbers in financial markets.


Round numbers are everywhere, and it turns out we're pretty obsessed with them. So when we go for a run, we run a 5k, right? Or maybe even shorter. If you are going to purchase something, you might anchor on the fact that £10 sounds like too much, but £9.99, that one pence difference, sounds really reasonable. It's something that we always come back to. And we do it in a world of investment as well, by the way, because when the S&P 500 hit 5,000, it felt like a really significant thing.

Hit the press everywhere. You don't get headlines when the S&P is at 4,997, do you? And immediately you have analysts then talking about when it might hit 6,000... it suddenly seems relevant, it feels important. But is it? Not really. I'm sure lots of technical analysts, by the way, might disagree with me when it came to write out their charts. But when you actually look going forward about the forecasts from analysts over the course of the coming months, what will the S&P finish at by the year end?

There is still a huge spread, about 1,200 points, between the bottom and the top. So I guess what am I trying to say? It might feel significant, it might feel important, but that's just your brain... a seductive, seductive narrative that we're then drawn towards. But the reality is... shouldn't end up impacting any kind of decision you make, certainly when you're building a portfolio.

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