Fears of an economic downturn caused by supply chain interruptions and worker shortages due to the coronavirus may have been brought about by a constant stream of disinformation. Stories claiming that deaths by the virus reached into the hundreds of thousands, claims that the virus was a bioweapon run amok or that the United States had created the coronavirus flooded social media in the days leading up to a nearly thousand point drop from the previous close in the Down Jones Industrial Average on February 24, 2020.
Financial markets are particularly susceptible to disinformation driven manipulation
“The breadth and volume of disinformation campaigns are designed to manipulate beliefs, impacting everything from the general public to the global stock markets,” said Wasim Khaled, CEO and founding partner of Blackbird AI. “Financial markets are particularly susceptible to disinformation driven manipulation because often, the markets are driven by perceptions relating to fears and speculations presenting opportunities for threat actors to benefit.”
Wasim explains how this disinformation works in a new report on Covid-19 (Coronavirus) Disinformation.
“Today’s disinformation campaigns are more calculated than ever, using endless micro-narratives and of course macro-narratives like the ones in our COVID-19 Disinformation Report,” Khaled said. “COVID-19 fears saturate through repetition like many others, all recycling what they heard ‘somewhere’. Multiply this effort over a few weeks and tens of millions of Coronavirus posts, memes, articles, and pickups by every media channel, and the result is an inevitable drop in market confidence. Understanding the manipulative nature and intention of disinformation is the way to allay market fears.”
In a briefing on February 13, Dr. Michael Ryan of the World Health Organization said that there needs to be a better understanding on what’s scaring people in terms of misinformation. “We need a vaccine against misinformation as well and in that sense we need a communications vaccine.”
Disinformation regarding the coronavirus or COVID-19 as it’s known in medical circles, is being attributed to a number of sources ranging from Russian operatives to the Chinese government to claims that the virus comes from eating meat. The team at Blackbird AI has been tracking the disinformation to help figure out the sources.
“We try to identify types of harmful information on the internet,” Khaled explained, saying that he was looking for all types of manipulative information. We’re looking for it spreading. “We focus on the manipulation because that shows intent. These are things people would not have done in normal social media activities.”
“We try to quantify the total volume of messages and look for inorganic propagation that leads to harmful inorganic content that can be used to drive harmful narratives,” Khaled said. He explained that they use this information to create a Manipulation Index.
Khaled said that it’s important to inoculate the public against the effects of misinformation through education. He also said that it’s critical for companies to understand the effects of manipulation through disinformation so that they can be prepared and react accordingly.
Social media outlets are already working to combat the spread of disinformation on their services. Twitter is deactivating accounts that are spreading disinformation related to the coronavirus. Facebook is putting warnings over links to disinformation regarding the coronavirus, as well as other types of disinformation including political disinformation, where Russian intelligence agencies are already quite active.
“The public markets are pretty efficient,” said Marcus New, general partner and CEO of InvestX Capital. “It takes something global to impact that efficiency,” he said, “It usually gets corrected very quickly. You might see it dip for ten to thirty minutes on a rumor, but then markets recover very fast.”
New said that this isn’t the case with private markets where information is very difficult to find, and where disinformation can have a significant impact. He said that with the coronavirus, it’s really global, and he said that there’s a lot of fear among individuals in the market. He said that, and fearful headlines mean people pay attention to more stories, and that impacts crowd psychology.
In the case of the February 24th market drop, once the Dow fell it stayed lower the rest of the day. There are varying opinions as to why this was, but a number of observers indicated that it may be due to the amount of misinformation the preceded the drop. But New suggested that it is likely true that business will in fact be impacted by the virus. He also said that he thought the markets would continue to drop before they recover.
New said that professional investors won’t be swayed as much by the misinformation that affects the markets because they have access to more information. But he said that the fear surrounding the coronavirus has caused instability in the markets, and that may keep the markets down longer than might otherwise be the case.
The real secret to recovery in the long run is for investors to learn to recognize misinformation when they see it, and not let that affect their judgment. But that could take a while.