Is bad news, good news? The answer is: It is when it is, and it’s not when it’s not.

Helpful? Of course not. But neither is trying to trade or allocate around those types of headlines.

This week the answer to the first question above was “yes.” Why? The logic/hope is that the recent economic data showing a weakening economy means the Fed will once again consider cutting rates this year.

This ever-changing narrative around the Fed’s future moves, and the timing and size of rates cuts has been whipping markets and investor sentiment around for months.

As Morgan Housel talks about in the “When You’ll Believe Anything” chapter of his book “The Psychology of Money,” investors are prone to act based on stories even if the reality is something quite different.

As he states, “Stories are, by far, the most powerful force in the economy. They are the fuel that can let the tangible parts of the economy work, or the brake that holds our capabilities back. At the personal level, there are two things to keep in mind about a story-driven world when managing your money. First, the more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true. … Second, everyone has an incomplete view of the world. But we form a complete narrative to fill in the gaps.”

How do Housel’s insights apply to us as investors today?

As to his first point, investors should be cautious about tying the success of their investment decisions and allocations to the narrative that the Fed will cut rates by a certain date or size. The media can spin a narrative around cuts based on a few data points, but they don’t really know.

Markets, and many investors, desperately want the Fed to cut rates, but as we’ve already seen this year, neither the collective belief in impending cuts nor desire for impending cuts to be true made it so.

As to his second point, both markets and investors hate uncertainty, even if it is of course an inevitable part of the journey as an investor—or human, for that matter. However, trying to take select data points to “fill in the gaps” doesn’t make it so.

Perhaps the most important subpoint for investors to always keep on top of their mind is his statement that “everyone has an incomplete view of the world.” We may think we know—we may be right from time to time—but there are always far more variables and unknowns than knowns, and thus investors should proceed with caution and humility.

His first point is why investors are continuously tempted to time markets, the second speaks to why they, more often than not, fail in their attempts.

Regarding unknowns, consider this recent quote from Bloomberg: “It’s hard to get a handle on global economic trends. It’s even harder to understand how fairly some of them have been priced. This is particularly true in U.S. equities, which have been buffeted by myriad influences, from profitability to new technology to interest rates. Perhaps this is why stocks have struggled to know how to respond to weaker economic data, or put more plainly, whether bad news is bad news for stocks.”

The takeaway is, even if you could know the direction of the economy for certain, which you can’t, attempting to understand how that view is or isn’t priced into markets is yet another essentially impossible hurdle—not to mention one that many investors fail to consider. Things aren't as simple as good or bad to markets, it’s far more often about relative expectations than absolutes.

There are, of course, times to adjust allocations, but as I’ve cautioned before, such moves should not be based on predictions or emotions. More times than not, you know a proper reallocation because of how difficult and counterintuitive it seems at the time and not because such a decision is the popular, easy choice.

Building your financial framework for day-to-day decisions as well as to aid you in making adjustments to your plan/portfolio is where real differences can be made and where we urge you to spend your time and emotions.

Tim Mitrovich is the CEO of Ten Capital Wealth Advisors LLC, in Spokane. He can be reached at 509.325.2003.