The Ebb and Flow of “Buy the Rumor, Sell the News”

In the weeks leading up to the recent round of US-China trade negotiations, hints of a truce circulated in Washington and were amplified across trading desks and financial media. Trump even suggesting people get long stocks. Risk assets surged—especially industrials and technology stocks most exposed to the tariff regime. Volumes climbed. Sentiment soared. By the time the truce was confirmed, the market had a nice gap up and now appears to be in a distribution phase.

This will likely prove to be a textbook case of a well-known market adage: buy the rumour, sell the news. But the simplicity of the phrase belies its complexity. On the surface, it describes a strategy that profits from anticipation rather than outcome. Traders position early on whispers, chatter, and half-formed expectations, and then unwind when confirmation arrives. The idea is not to trade the event, but the lead-up. Yet as with all market idioms, the truth is more subtle.

The Sentiment Cycle

Buy the rumour, sell the news is not a formula—it reflects behavioural cycles. It captures the way crowd psychology moves faster than fundamentals, and how the pricing mechanism of markets anticipates rather than reacts. Rumours inflate expectations. By the time the official announcement is made, the market has already digested the scenario. Any deviation from the imagined script can cause volatility, even if the news is objectively positive. And when the facts merely confirm the fantasy, there is nothing left to price in.

For example, a company rumored to beat earnings estimates might rally over several weeks leading up to the report. When the actual earnings arrive and confirm the rumors, the stock could drop—not because the results are poor, but because they didn’t exceed already lofty expectations.

Negative rumors can drive prices down, only for the stock to rebound (or stabilize) when the outcome is not as dire as feared. There is a difference between foresight and frenzy, and the gap is often measured in hours, not days. Traders who confuse the two often find themselves caught in the reversal. Example TSLA’s strong (ridiculous) rally on terrible sales and earnings.

The Risk of Crowded Trades

More than anything, the phrase underscores the importance of understanding sentiment. A heavily crowded trade—where positioning, leverage, and consensus are all pointing in the same direction—can collapse under the weight of its own confidence. The point of exhaustion arrives when there is no one left to buy. Markets, like rowboats, tip when everyone shifts to the same side.

Loading up on beaten down stocks during recent panic selling expecting a pause / reduction in tariffs was the correct risk to reward trade vs buying today. Building the skills to execute and buys on the lows requires forming the habit of not being greedy and also taking profits after strong rallies and keeping funds available to deploy when the plunge occurs.

Trading the Whisper, Not the Headline

Navigating this landscape requires more than charts and newsfeeds. It demands a kind of cognitive calibration—a mental sharpness that allows for clarity under pressure. In this sense, the trader’s mindset is not unlike that of an F1 driver. No amount of technical skill matters if the body is fatigued, or the mind is scattered. The driver trains not just for speed, but for clarity of perception at 300 kilometres per hour. Similarly, the trader must cultivate both discipline and detachment, managing not just risk but their own psychological bandwidth.

The Energetic Edge: Aligning Strategy with Clarity

This mindset, explored in The Energetic Investor, highlights how managing one’s mental and physical energy is critical for success—not only in markets but in life. The book emphasizes learning to assess and manage risk, understanding crowd psychology, and increasing perceptive abilities. Just as a trader must recognize when a stock is overcrowded, individuals must identify when their own thoughts and habits become counterproductive.

By combining practical tools with self-awareness, you can move from reacting impulsively to acting decisively, aligning your strategies with both market trends and internal clarity.

It’s a rhythm you feel rather than force, an equilibrium between preparation and intuition.   By investing in both your market knowledge and your own energy management, as outlined in The Energetic Investor, you’ll not only learn to ride the waves of rumor-driven markets but master the art of knowing when to jump in and when to step back. After all, the key to thriving in the ebbs and flows of investing is knowing how to keep your balance—even when the boat tips.

If you liked this article, check out “The Energetic Investor” now available on Amazon.