How To Embrace Awful Turns In Good Markets

Lose your ‘recency bias’ especially as it pertains to past market trauma


“The tendency to think that what’s been happening lately will keep happening is one of a group of Behavioral Financial Biases that can cloud investors’ judgment. Recency Bias can cause investors to stay in stocks or other instruments because they have been performing well, despite warning signs like historical or relative high valuation. The bias can conversely keep investors from buying when stock prices are low, as in early 2009 when, because for months stocks had been falling, under Recency Bias one would expect that to continue.” (

As it pertains to our current market I think for many the ‘recency’ may not be so recent. In other words the trauma inflicted upon investors in 2008/2009 remains fresh in the minds of many. Those that continued to hold stocks during that trying time never want to experience that severity of loss and fear again. There are those who sold in the panic and subsequently came back as investors. They hold the same fear. And then there are those who never came back, fearful to this day of a similar event occurring in the near-term. After 10 years of continually rising stock prices most have not bought into the ‘recency bias’ that this uptrend will stay in place. On a pure sentiment basis I view this as very positive. You have to look forward, not back.

Tune out the “nattering nabobs of negativism,” i.e. the media

Not fond of nattering nabobs

I have been writing since February of 2013. Ergo, you have a history of the negativity posted by the media (v. my counterpoint) and  a market which has shrugged off their constant negative drone and more-than-doubled in price and made new all-time highs. The media message has been be careful, play it safe and that the next big debacle is just around the corner. The message really has not changed during the last decade. Here is a sampling from this week’s Barron’s (you need a subscription to view):

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Disclaimer: The information presented in represents my own opinions and does not contain ...

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