Headline risk is the risk that stories in the media will hurt a company’s business. With the endless torrent of news washing over the world, no company is safe from headline risk. For example, news of the Fukushima nuclear crisis in 2011 punished stocks with any related business, from uranium miners to U.S. utilities with nuclear power in their grid.
One bit of bad news can lead to a market backlash against a specific company or an entire sector, often both. Larger-scale bad news—such as the debt crisis in some eurozone nations in 2010 and 2011—can punish entire economies, let alone stocks, and have a palpable effect on the global economy.