I recall earlier this year, during a period when virtually every dip in stocks was getting quickly bought, pushing the major indexes past prior highs, a friend commented to me how he comforts his wife when she’s nervous about a big down day: He’d say “Honey, I’ll betchya it’ll snap right back up tomorrow”, and he told me he was virtually always right.
Well, of course, I told my friend that that’s definitely not always the case. Sometimes immediate conditions are such that the would-be buyers decide to sit on the sidelines for days, weeks, even months, waiting for things to shake out a bit — and waiting for the average investor to panic.
My friend was succumbing to a very common human condition they call “recency bias”: In terms of the stock market it’s the propensity to project current market action far into the future. It’s something, I assure you, that those would-be buyers are banking on.
My point: Never succumb to it. Not when market fluctuations are going your way, and not when they’re not.
In case you missed it, and need a little perspective, here’s this week’s message…